State of the Energy Market – 7th April 2022

Daily Updates

The long-awaited Energy Security Report was finally announced by the government yesterday, 7th April.  We’ve been commentating in our daily updates on what we expected to see in the report and there was little in the way of surprises. The key areas of interest are highlighted below:

  • Increasing our current capacity for offshore wind from 11GW to 50GW by 2030.  This is an increase on the previous 2030 target of 40GW, meaning that if we hit the new target, there will be enough electricity generated to power every home in the UK through true, green energy.
  • To increase the amount of electricity generated through solar power by five times the current levels by 2035.
  • Making 24GW of nuclear power available by 2050, which will come from extending existing facilities and a set of new Small Modular Reactors (SMRs).
  • Increasing low-carbon hydrogen from the previous 5GW to the new target of 10 GW, with a commitment to provide at least 50% of this from green hydrogen.
  • An introduction of up to 5GW of floating wind into the energy mix.
  • An introduction of a licensing round for North Sea project developments is an acknowledgement that renewables will not replace fossil fuels straight away and there will be a period of transition. There was also a nod to not having to import oil and gas from further afield will help to bring down the carbon footprint for the fossil fuels we will use in this transition period.
  • There was a little support for industrial customers from some sectors with the extension of the Energy Intensive Industry (EII) scheme, which will be extended by a further 3 years.  

So, what was missing? There was no target for onshore wind, although we expect that this will remain a hot topic in the coming years and there’s a good chance that an increase in onshore wind will be added to mix in the future.  A further commitment to more oil and gas from the North Sea will make it harder to reach our target of hitting net zero as a nation by 2050.  There was also a surprising lack of commitment to energy reduction projects.  The cheapest unit of energy is always the one that you don’t have to use and so not adding in projects that will help households and businesses to reduce their consumption was probably the biggest surprise.

All in all, the report has had mixed reviews, but in general the need to ensure we have a long-term plan to ensure energy security for the UK and that we are less reliant on fossil fuel imports from countries with controversial foreign policies, is of course a good thing.  Debate will remain as to whether the report goes far enough or quickly enough to implement these needed changes. One thing is certain, during what has already become difficult conditions due to the cost of living crisis, UK businesses and domestic customers, will be asked to dig further into their pockets to help pay for the acceleration of what were already ambitious targets, especially for offshore wind and nuclear projects.

Gas

Wholesale gas prices fell a little on Wednesday, 6th April, with May 22 closing at 239.42 pence per therm, which was a 1.1% drop against Tuesday’s close.  Prices initially opened down, which caused quite a bit of buying interest that led to prices flipping upwards in the late morning. As the day progressed , there was a lack of any bearish news and so prices ended up drifting downwards again.

Electricity

Wholesale electricity prices also fell on Wednesday, 6th April but by even less compared to gas. May 22 closed at £210.99 per MWh, which was a 0.2% fall compared to the previous day’s close.

In other energy related news:

Stay Informed! Are your utilities up-to-date?

We are here to advise you on every aspect of usage, procurement and net zero reporting for electricity and gas! Get in touch for a free no-obligation quotation.