Average energy prices at the start of this year were higher than they were at the start of 2018 at £55.58 per MWh and £52 per therm, equating to a 21.83 per cent increase for electricity and a 12.74 per cent increase for gas (see tables, below).
A combination of exceptional renewable energy generation and an overall downward trend in energy markets eased off the pressure on the UK’s gas-fired power stations for generating power. This trend continued towards the latter part of March 2019 with an unseasonably low demand as a result of milder temperatures. However the cold snap that followed led to a rise in demand which in turn pushed up prices as the grid was unable to cope with demand. The additional capacity was imported from neighboring EU countries where trading tariffs and the weak pound led to higher energy prices.
From April prices for both power and gas have been relatively stable although there continue to be challenges to capacity from unreliable renewable sources and nuclear power station outages.
Currently market prices are at similar levels to June 2018. However the current geopolitical uncertainties across the globe are likely to have an impact on the current relative stability in our energy markets.
It is unclear to what extent Brexit will affect our power market. The UK currently shares direct connections via four interconnectors with four EU countries, and another eight interconnectors are planned.
A No Deal or Bad Deal Brexit could lead to the abolition of the single market tariff to be replaced with independent trading deals. Depending on the tariff levels agreed there is a strong possibility that energy prices in the UK could rise.
Power: Year to date market prices: 2018/2019
Gas: Year to date market prices: 2018/2019
If geo-political tensions between the US and Iran continue and oil prices rise, there is every likelihood of a spike in electricity and gas prices. Domestically Increased power generation via renewable sources could support a recovery in wholesale prices.
However, there are currently issues with Norwegian gas flow supplies and our offline nuclear station, which may again lead to the grid being unable to support demand. This would result in the use of the increasingly expensive carbon taxed coal-fired power stations.