Energy Market Update - Friday 30th June 2023
In the news this week
ESO (Electricity Systems Operator) has confirmed it will have no coal-fired power as back-up this winter, if needed. Last winter, there were five contingency units on call. The ESO had said that it remained in talks with EDF and Drax about keeping their coal-fired generation on its standby contracts. It was said that the 2023 government had talked to operators of two winter contingency coal plants to establish arrangements for this coming winter. Both operators have confirmed that they will not be able to make their coal units available. All coal-fired power units were to have been shut by October 2024, as part of the UK’s ambitions to tackle climate change. As a result of losing 4 coal-fired generators in comparison to last year, the UK will have to rely on power imports in time of supply constraints. This could cause increased upward pressure to the market and blackout concerns during this winter, when supply concerns for winter are already elevated.
Last year, global energy demand rose by 1% and record high renewable energy growth did not affect the dominance of fossil fuels. It was reported that fossil fuels accounted for 82% of supply. Last year, Europe and Asia saw record high prices for gas and coal, after Russia invaded the Ukraine. Oil, gas, and coal covered most energy demand cement itself in 2022, even though we saw the largest ever increase in renewable capacity at a combined 266GW. Scientists have stated that the world needs to cut greenhouse gas emissions by 43% by 2030 to have any hope of meeting the international Paris Agreement goal. The report stated that energy consumption grew everywhere apart from Europe. If global energy demand continues to rise in coming years, Europe needs to focus on energy security so that they are less reliant on fossil fuels and imports from other countries.
Siemens Energy have warned quality problems at its wind turbine manufacturing unit could take years to fix, wiping a third off its market value and dealing a heavy blow to one of the biggest suppliers of wind turbines. The group scrapped its 2023 profit outlook after a review of its Siemens Gamesa wind turbine division exposed deeper-than-expected problems affecting 15-30% of the more than 132GW worth of turbines worldwide. It’s been said that dealing with the issues could cost Siemens more than €1billion to fix any flaws in rotor blades and bearings that could cause damage, ranging from small cracks to component failures. Maria Ferraro has said that the majority of the hit would be over in the next five years. This news could fuel upward pressure in European energy markets, as it could indicate that significant outages at many European wind farms may end up taking place, boosting fossil fuel generation.
Current Market Drivers
Norwegian gas flows are to improve over the next few days, as Troll and Karsto are expected to return today, providing downward pressure due to increased flows.
Wind generation is still set to increase into next week and temperatures are sitting above seasonal norms, calling for less gas-fired generation and therefore offering downside to day-ahead contracts.
UK nuclear maintenance is set to pick up over July, which is likely to provide upward pressure to the day-ahead baseload contract over the course of the month.
Rough storage facility maintenance has now been extended to the 9th of July, reducing potential storage injections and providing upward pressure to near-dated contracts.
Yesterday, Nick Gauntlett, CEO of Dukefield Energy hosted a webinar in partnership with Crescent Purchasing Consortium. Click here to watch the recording.