State of the UK Energy Market Q2 2023
Electricity
Most trading periods eased back during Q1 2023 and reached some of their lowest levels since before the war started in February 2022.
• The October 23 electricity annual fell back to £125/mwh from a highpoint in January 2023 of £173/mwh.
• As at time of writing (12th April 23) the October electricity annual is currently trading at £144/mwh.
• Day Ahead price have also fallen back. They reached £180/mwh in late January and currently (at time of writing) sit at £91/mwh.
• The April 24 electricity annual started 2023 at £165/mwh and currently (at time of writing) sits at £138/mwh having fallen to £122/mwh in March 23.
• The October 24 electricity annual has seen less movement, starting the year at £156/mwh, fell to just below £120/mwh in March and at time of writing sits at £129/mwh.
• We must remember that the electricity market used to trade in the margin of £30-£50/mwh in 2021 and before so even though current levels are significantly below the highs we saw in 2022, we are still significantly higher then what used to be classed a normal in 2021 and before.
• The original EBRS government discount scheme ended on 31/03/23 with the new reduced scheme starting on 01/04/23.
Gas
Similar to the electricity market, the gas market has seen the prices fall back over Q1 and start to increase slightly again towards the end of the period. The market still sits above where the market was when the war broke out though in February 22.
• The October 23 gas annual started the year trading around 177p/therm and fell to 120p/therm before increasing again to (at time of writing) 144p/therm.
• Day Ahead gas prices started the year at around 160p/therm and fell to 92p/therm before increasing again to the current (at time of writing) level of 101p/therm.
• The April 24 gas annual started the year floating around 166p/therm, fell to 121p/therm and now (at time of writing) sits at 144p/therm.
• The October 23 gas annual opened the year around 150p/therm, fell to 111p/therm and now (at time of writing) sits at 132p/therm.
• Like the electricity, the original EBRS discount scheme for businesses ended last month and the new reduced scheme has now started from 01/04/23.
Summary
Europe has had a reduced amount of nuclear electricity capacity available to it during Q1 and although wind and solar levels have been good, the nuclear shortfalls have held the market back from the possibility of further falls.
Europe (overall) benefitted from a milder than expected winter which was one of the major concerns and price-drivers from last year. This meant that storage levels finished the winter season higher than previous averages and helped to reduce the market prices. It could have easily been the opposite though had we suffered a cold winter. The market now looks at the forward market and Winter 23 period covering October 2023 – March 24 and again the concerns as the reality is, Europe is still suffering from reduced levels of gas available due to the lack of Russian gas supplies.
Germany managed (incredibly) to build its first offshore gas terminals for LNG shipments. Something that would normally take over 2 years to complete, Germany managed to build in less than a year and this has helped to shore up their supplies. It certainly doesn’t plug the gap of what used to be purchased from Russia, but it certainly helped to reduce their risk exposure.
The UK wasn’t heavily reliant on Russian gas imports, in fact we received minimal, but we are tied to the European markets, so if they suffer, our prices are directly impacted. We have increased our imports from Norway along with other LNG shipments, which again helped up shore up our supplies.
We are in a much better position than last year, but we aren’t out of the woods yet.
