The speculation regarding the return of the Russian gas compressor from Canada to Russia, via Germany, was confirmed by Canadian authorities on Sunday (10th July). This news led to wholesale energy markets opening down again this morning and we’ve seen drops of 13% for prompt prices and 6% for curve prices with Winter 22 leading the way for gas again.
Monday (11th July) saw the lowest level of gas transported from Russia to Europe for many years and the Nord Stream 1 gas pipeline closed for 10 days of planned maintenance. The market is watching closely whether Russia will be switching the Nord Stream 1 taps back on following the maintenance period. Prices for the remainder of the year will be heavily influenced by the outcome
As we reported in our last daily market update, the news that the Canadian government were
considering returning the Russian gas transporter they were holding to Russia, via Germany,
was well received by the energy markets. Russia had stipulated that upon return of the
compressor, the gas volumes that they were sending through to Europe, through the Nord
Stream 1 pipeline, would increase by as much as 60%.
August 22 wholesale gas prices gas prices dropped by 14.3% to close at 240.43p per therm.
August 22 wholesale power prices dropped by 16.8% to close at £248.39 per MWh
In other energy related news:
- The UK regulator Ofgem is considering reforms that could set wholesale electricity prices at local
and regional levels as opposed to the current national levels. In a move that will help with the
planned transition to net zero, whilst also reducing the dependance on gas imports, the plans
include reforms to the electricity wholesale market, which would limit the potential price setting of
natural gas by splitting the wholesale market and using price signals. They believe this would lead
to a more efficient system and could save customers millions and potentially billions against the
current open market approach.
- We should see in the coming days whether the UK government will be planning to extend the
windfall taxes announced by the former Chancellor Rishi Sunak, whilst he was still in office. Given
the profits generated in the first half of this year by energy companies like BP & Shell, the
government has imposed a 25% tax on the profits of North Sea oil and gas companies. Officials are
expected to soon advise whether the same, or similar, levels of the windfall tax will be applied to
power generators as well. This will impact companies like Centrica, the owner of British Gas, SSE
and Drax, all of which have seen a decline in share values recently.
- Ofgem has met with the Chief Executives of many of the UK’s top suppliers to try to come up with a plan of collective support for domestic customers from across the energy industry. As we have
been reporting for some time, it is highly likely that the next domestic energy price cap review, due
to kick in from 1st October 2022, will see further increases in excess of £1,000 to a new record
average level of over £3,ooo per annum. Latest figures suggest that more pain will hit the
subsequent review period on 1st April 2023, where the level could rise to over £3,600 per annum for
average users. Some of the measures discussed include the scrapping or a reduction to standing
charges, more support from debt charities for customers struggling to pay bills and a change to the
way that suppliers calculate direct debit payments.
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