State of the Energy Market – 16th March 2022

Daily Updates

There’s a lot going on in the energy market right now, with bills rising, anxiety caused by the Russian invasion of Ukraine, suppliers exiting the market, and lots of jargon being used which can make things confusing. The market has reacted positively yesterday to the news from President Zelensky that the Ukraine will be parking their ambition to join NATO as the first significant sign that a peace agreement with Russia is on the horizon.

Gas

The wholesale price for Apr 22 rose slightly yesterday closing at 274.40 pence per therm, which was an increase of 3.48 pence per therm on Monday’s close. 

Electricity

The wholesale price for April 22 power increased from £239.34 per MWh to £240.89 per MWh, given the recent volatility. Power has followed the downward trend for gas today and we’re currently seeing prices at 4% below yesterday’s close.

In other energy related news:

  • Even though wholesale energy rates have been falling since the peak seen on 7th March, some energy suppliers are still holding off on providing new contract offers, especially for any price requests beyond 12 months.
  • Ofgem are considering changing the notice period they provide to the industry for future price cap changes for domestic customers. Currently, Ofgem provides a 2-month notice period to advise what the next price cap will be. They are considering reducing the notice period to 1 month, thereby allowing their review to be only 1 month out from wholesale prices instead of the current 2 months out. If agreed, this change could kick in from the next price cap implementation on 1st October 2022.
  • For the first time in almost 100 years, we will soon see the National Grid install new style electricity pylons for transporting electricity across the grid. The Blackpool Tower style existing pylons will be replaced with large, white, T shaped pylons that look a little like a wind turbine. The new design comes from a Danish company, Bystrup, which beat over 250 other design entries. The work on replacing the existing 88,000 pylons will begin soon.
  • As wholesale prices have been falling, Russian gas flows into Europe have dropped a little in the last few days. This backs the view of many observers that the increase in flows from Russia into Europe since the start of the Ukraine invasion has been based on economics, making hay whilst the sun was shining on record wholesale prices, rather than any other more controversial reasons.

Boris Johnson is currently in the Middle East looking to negotiate new energy contracts to help secure the UK’s fossil fuel supplies in the coming years, whilst we transition to increased levels of renewable energy.  Also on the table is the offer for investment in more renewable projects in the UK. However, some commentators are asking whether moving away from Russian fossil fuel and replacing it on a like for like basis with fossil fuel from countries like Saudi Arabia is such a good idea given questions relating to the Saudi’s recent human rights record.