Energy costs: The cold snap at the beginning of February saw annuals markets rise to a 2-year high as temperatures plunged across the UK (with some parts hitting 25-year record lows). Prices recovered as the weather turned milder and wind generation improved. The wider energy complex saw similar increases – with oil, coal, and carbon all spiking. LNG deliveries have increased since late January, but may temporarily slow with production halted in the US again due to the weather. The general volatility is likely to continue for the next few weeks.

 

Upside:

Supply outages  – The new interconnector between UK and France has remained offline due to ongoing issues. Output from Troll, Norway’s largest gas field, has also been restricted by unplanned maintenance.

Oil markets – Prices rose from $55 to $65/barrel over the last fortnight, but have fallen back slightly since with supply currently outstripping demand.

Carbon costs –  These breached 40 Euro/TCO2 for the first time and look set to remain volatile for the moment.
Coal  – Prices for coal rose to $68/tonne as coal-fired power stations briefly went back into production during the cold snap. This has again fallen back since.

 

Downside:

LNG – LNG deliveries are up on January, but may fall temporarily until the US output is restored after their cold snap ends.

BritNed Interconnector– This is now back online.

Weather – Temperatures are expected to be milder and wind output healthy for the remainder of the month.

Lockdown – Gas and power demand remain dampened by the continuing UK lockdown.

 

Could go either way:

Sterling – has continued to strengthen against both the Dollar and Euro shielding the UK energy markets for some of the impact of oil, coal and carbon price increases. The continued rollout of the UK’s vaccination programme will influence its future direction

 

Non-energy costs:

On the electricity side organisations will see further increases in pass through costs from both government and industry infrastructure providers from 2022 onwards due to pandemic-related demand destruction. Levies normally collected via unit rates have fallen short of expectations and have fed through to further increases in ROs, FiTs, EII and other transportation, distribution and renewable investment charges. Targeted Charging Review will now take affect from April 1st 2022, one year later than expected, but are now being built into longer term contracts. Revised projections are available on our website via the links below.

Is your organisation covered by the new Streamlined Energy and Carbon Reporting (SECR) scheme from the Environment Agency?

Designed to replace in part the Carbon Reduction Commitment (CRC) which ended in 2019 and to follow on from the energy savings recommendations generated by ESOS compliance. Note, SECR will cover a wider scope of organisations than CRC and ESOS do. SECR requires all large enterprises to disclose within their annual financial filing obligations to Companies House, their greenhouse gas emissions, energy usage (from gas, electricity and transportation as a minimum), energy efficiency actions and progress against at least one intensity ratio.

If your organisation qualifies, participation in this scheme is mandatory. Eneco Consulting are happy to provide assistance with your regulatory obligations. Full details are available on our website on the link below.

Are you eligible for an EII rebate?

Under current rules, if you qualify at an industry sector level and your business passes the 20% electricity intensity test you may qualify for exemption to CFD and RO charges. Please see the attached Government RO/CFD guidance document and update and give Abby a call on the main number to discuss this further.

A copy of our detailed market report is available: Eneco Market Information mid Feb 2021

Gas and electricity prices from 2009 to date are available here: Eneco Gas and Electricity Pricing Trends mid Feb 2021

A copy of our environmental charges and Climate Change Levy rates from 2012 to date: Environmental Pass Through Charges and CCL with Definitions ppkWh 02.12.20

A copy of RO/CFD guidance document: RO_CFD_Guidance_Revised_July_2018

SECR: SECR EA Guidelines

TCR Charges (Targeted Charging Review): TCR Charges (Targeted Charging Review)