The UK Energy Market – Fit For This Winter



Against a backdrop of national headlines warning of potential blackouts, it may surprise some that the UK, along with most of mainland Europe, is entering winter 2015 with wholesale energy prices at record lows.

Following supply and demand logic, surely this pricing trend should be an indication of long, comfortable supply margins, weak demand and little chance of nasty surprises? Not necessarily. The fundamentals warn of a somewhat different picture. 

The UK will enter this winter with the tightest electricity generation capacity margin in a long time. On the natural gas front, questions remain about the national system’s ability to cope with supply shocks as a number of key risks loom.

The pricing signals for European carbon indicate a bull market going into this winter, with most analysts predicting prices will push higher by the year’s end and higher still in 2016. If the electricity and gas markets are forced to contend with a cold, high-demand winter, the addition of inflated carbon prices could lift energy prices higher still. So what is keeping prices at Britain’s NBP natural gas hub for this winter in check, alongside electricity? Global energy commodities may hold the answer.

The LNG market is expected to remain oversupplied over the coming winter, providing new production facilities start up as expected. The outlook for the European coal market, in common with LNG, is bearish this winter against a backdrop of stubbornly high stocks, weak demand and new environmental regulation.

However, the only certainty about the energy markets is that nothing is certain. Therefore the best that system operators, utilities, suppliers and generators can do is prepare for the more extreme eventualities, particularly during the high-demand winter season.

This white paper examines this winter’s emerging fundamental risks and asks: Is the UK, and the wider European energy complex, really as fit for winter as the numbers suggest?

Download the UK Energy market whitepaper »

ICIS Power Index (IPI)

The IPI is published daily by ICIS, an independent authority on UK electricity market pricing, and is available at no charge.

The latest published index, volumes, number of trades and related data can be downloaded for free.

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European Spot Gas Markets (ESGM)

The benchmark report for European natural gas is now covering daily pricing for the Slovak market.

This addition complements the ESGM coverage of Europe’s most active traded gas markets, including Britain, further providing transparency to wholesale gas trade in the region.

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