European energy traders must strap themselves in and prepare for a rocky ride in winter 2016-17. Sustained supply shocks in wholesale gas and electricity markets have flipped the outlook for the high-demand season on its head, and the warnings of regulators and grid operators, that fundamental risks awaited the markets during the winters from 2015 through to the end of the decade, have materialised, at least for this season.
The unfolding high-risk scenario has at its heart Europe’s energy transition, which has seen fossil-fuelled power plants close at pace, and the markets struggle to fill the gap. As the new ICIS Winter Outlook explains, much risk this winter has already been priced into the first half of the season, and could well extend into the second. In the process the markets have been reminded just how daunting the scale of the energy transition really is, and just how quickly the risk associated with a wholesale industrial transformation can rear its head.