Energy Market Update - Friday 28th April 2023
In the news this week
The UK and the Netherlands plan to build what would be Europe’s largest cross-border electricity link, which will also be connected to an offshore wind farm. The “Lion Link” interconnector would allow for 1.8GW of power to be imported into the UK from a Dutch wind farm, or the same volume of electricity produced in Britain to the Netherlands in times of high domestic generation. The link is being developed by the National Grid and Dutch grid operator TenneT. This project is part of a pledge to develop European renewable energy generation and to limit Europe’s reliance on unreliable energy suppliers. There is unlikely to be much immediate market price action as a result of this news, though it may provide some bearish sentiment to much later-dated energy contracts on heightened future renewable generation.
Leaders from European countries have pledged to rapidly scale up North Sea offshore wind generation in order to strengthen supply security. European leaders are aiming for a combined 120GW of offshore wind capacity by 2030 and 300GW by 2050, which would more than quadruple the 25GW of existing North Sea wind capacity. European countries also pledged to work together to protect offshore energy infrastructure against security threats as concern shave been raised since unexplained blasts last September ripped holes in the Nord Stream pipeline. Europe is unlikely to see any immediate effects on energy price action at this time, although greater renewable generation could spell downside towards the end of the decade.
In order to shield the public against the soaring bills inflicted by the incredibly high power prices as a result of the Russian invasion of Ukraine, in a move similar to the UK, France introduced price caps to protect consumers. As electricity prices are yet to return to normal and short-term volatility remains a concern, France’s cap is remaining in place and now looks likely to be phased out over a two-year period. The household price cap for gas however is due to be phased out by the end of 2023 as prices have stabilised far quicker. Demand is likely to increase as market confidence will drive increased customer consumption. If the French nuclear plants are unable to fully meet this demand due to ongoing maintenance this may increase UK exports and increase UK prices.
Current Market Drivers
Temperatures are currently forecast to increase into next week while wind generation is also set to remain level, this could provide downward pressure to immediate energy contracts.
French energy supplier EDF have reaffirmed their projections that the country’s nuclear generation is set to improve to between 300-330TWh for the rest of this year, providing downward pressure to 2023 energy contracts.
Drax has ended coal-fired power generation at its North Yorkshire power plant after 50 years, which may provide good news to the price of UK carbon permits.
On Thursday 27th April, Nick Gauntlett, CEO of Dukefield Energy provided a webinar on the latest energy market news and contracts advice, in partnership with Crescent Purchasing Consortium. Click here to watch the recording.