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Energy Prices Bounce Back to Pre-Russia/Ukraine War Levels

Market Summary

January 2023

It’s nice to start the year with some good news about the energy market.

After an incredibly turbulent 2022, prices have finally dropped to levels not seen since before the Russian invasion. This has been caused by several factors including wind turbines generating over 45% of the UK’s electricity on certain days; good gas storage levels across Europe despite an unseasonably cold start to the year; and increased Liquified Natural Gas (LNG) imports.

The future also looks relatively positive as the UK and Europe continue to focus on improving their energy security. Increasing LNG imports and storage facilities to replace pipelined gas from Russia is one major initiative. During 2022 the United States played a major role in increasing European supply which is set to continue with the Freeport LNG also reopening soon following an explosion there last year.

King Charles recently announced the investment of five new offshore wind farms that should provide enough electricity to serve seven million homes and provide £millions to the Treasury for public spending.

Carbon prices have taken a hit though, as National Grid has ordered several coal generators to warm up just in case there’s a need to help with soaring energy demand due to the cold snap.

Electricity and Gas Prices

Electricity Prices

It’s been a good start to the year with gas and electricity prices reaching the lows that we saw in January 2022. The day ahead prices are trading close to the forward curve prices.

Gas Prices

A mixture of healthy gas storage, a mild winter, an influx of LNG, and high renewable generation has helped prices ease immensely. This includes days when wind generated over 45% of the electricity in the UK which eased gas consumption and resulted in lower gas prices.

Gas & Electricity Prices - 3rd January to 1st February 2023

Flexible Purchasing

EPEX Price

Our flexible purchasing customers are buying on EPEX, a European auction for power. Because they auction every hour of each day, customers get the “market average” price as opposed to a fixed-term contract over eg a 12-month period. Being on this product means that you will pay the average of each day for the month and once the market falls the price will follow.

The EPEX price currently is 13.31 p/kWh (commodity). With the non-commodity added to this, the overall rate will be 25 p/kWh+.

Carbon Prices

Carbon prices have increased by 22% since the start of the month, rising from €77 to €93 per tonne. This has been caused by escalating demand because of lower prices and the reinstatement of coal power stations creating the need to buy credits.

This is a different picture from Q4 last year when prices plummeted following lower demand and energy prices reaching record highs.

Oil Market

Oil prices have increased gradually over the last four weeks mainly due to demand picking up since the Christmas period.

January saw a 10% increase, opening at $73.13 per barrel and now trading at $85.29 per barrel.

While China tries to promote a consumption recovery after COVID-19 restrictions, the U.S. are likely to increase interest rates to cool down inflation, which will potentially reduce demand.

Contact Us

For help and advice with your business energy contact our team.

0114 327 2645

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