June has seen a lot of volatility return to the energy markets as a number of unexpected events saw prices rise, however, the market has proved quite resilient as prices usually eased as these events settled down.
Early in June, we saw a gas leak at the Hammerfest LNG plant in Norway, causing prices to rise. We also saw an unplanned outage at Norway’s Norne gas field and disruptions at the Nyhamna processing plant, coupled with the Hammerfest leak, this saw reduced gas volumes coming into the UK, causing price spikes and uncertainty. Later in the month, the Skarv & Asgard gas field in Norway also experienced unforeseen outages due to compressor problems at both facilities, further reducing gas flows from Norway.
Europe’s largest gas field, Groningen, in the Netherlands, is due to close permanently in October of this year. The Groningen gas field was a major source of gas for much of Western Europe.
Asian bids for LNG saw them attract large volumes this month, causing front-month prices to gain as much as 25%. UK deliveries of LNG have slowed this month, but the EU is still attracting good volumes to go along with high gas storage levels. EU gas storage is currently at a healthy level of 77%.
This month the weather also factored into the price volatility as high temperatures across Europe increased the gas demand for cooling.
Centrica has announced that they will be increasing the capacity of Rough, the UK’s largest gas storage facility, providing an extra layer of protection for next winter. Capacity has increased from 30 billion cubic feet to 54 billion cubic feet, enough to supply the UK for 6 days of average demand and 3.5 days of peak winter demand.
The events in Russia, with the rebellion of the Wagner Group, were a reminder of some of the unexpected events that could disturb the energy market. We did see a jump in near-term prices, which were reversed as the event fizzled out.
Energy Bill Discount Scheme (EBDS)
This scheme replaced the Energy Bill Relief Scheme on 1st April and provides 85% less support than before. The maximum discounts for electricity and gas will be 1.961 and 0.697 p/kWh respectively which will automatically be applied to eligible business bills.
Energy and Trade Intensive Industries (ETII)
Eligible businesses have until the 25th of July to apply.
Net Zero News
Renewable energy was a record 47.8% of total electricity generation in the UK in the first quarter of the year. This increase comes in contrast to a 10% decrease in fossil fuel generation.
The Boiler Upgrade Scheme, the Government scheme aimed at making household heating more environmentally friendly, has had a weak start in its first year. The scheme offers £5000 grants to help households transition to heat pumps. According to data, the scheme fell short of its target, issuing around half of the intended 30,000 grants in England and Wales.
The Climate Change Committee has criticised the government’s plans to hit net zero in a published report, saying targets are being missed in nearly every aspect. Some areas that were criticised were lower numbers of homes being insulated under government-backed schemes, slow progress on transport emissions, a lack of planning to change behaviour, no decision on hydrogen being used to heat homes and the slow pace of upgrading the UK’s grid to accommodate intermittent renewables.
The government has approved the building of one of the UK’s largest solar farms, Longfield Solar Farm, near Terling in Essex. The solar farm would be big enough to power about 60,000 households.
Electricity and Gas Prices
Gas and power prices saw their most volatile month of the year so far. Factors contributing to this include multiple unplanned outages in Norwegian gas fields, the announcement that the Groningen gas field will close permanently later this year, high temperatures and geopolitical influences. Near-term prices were the most volatile this month with winter prices remaining more stable.
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 e.g. 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 9.47 p/kWh (commodity). With the non-commodity added to this, the overall rate will be 22 p/kWh+.
A bullish trend emerged at the beginning of June which increased the price by 22% however more recently prices have retraced back to €90 p/tonne. The UK is tightening its carbon budgets for 2024 which could provide support for higher prices.
Brent prices have been very volatile this month due to supply cuts and economic pressures. Overall prices have increased by 4.5% throughout June ending with bullish sentiment. The news that Moscow will make a “voluntary” supply cut of 500,000 b/d into August has caused the price to increase 1.5%.
Get in touch
Our team are independent energy advisors who provide competitive gas, electricity, and water prices for commercial businesses across the region.
Our complete energy management service also includes helping businesses to identify potential savings through energy audits, tax levy rebates and grant funding. We can also help you plan for Net Zero and achieve compliance with our in-house ESOS assessment service.
Contact us for a free initial consultation about your business energy. 0114 327 2645