UK Energy Pricing Trends - 19 Feb. 2021

UK Power Pricing Trends | 19 February 2021

A combination of warmer weather and stronger renewable generation output – both actual and forecast – as well as softer gas prices guided U.K. power contracts lower last week. The declines were most notable on the day-ahead market with power demand 15% lower on Friday compared with a week earlier. Marked declines in carbon EUAs weighed further on U.K. power pricing with the European allowances remaining a proxy for the highly-anticipated UKAs.

UK Natural Gas Pricing Trends | 19 February 2021

The decline in short-run U.K. gas pricing last week was consistent with a pattern of falling demand. Local distribution zone offtake, largely associated with residential and commercial heating demand, fell by almost half Friday to Friday, while stronger renewable generation output saw power station demand fall from an intraday peak of 78 mcm/d to just 46 mcm/d in the same 7-day period. Longer-dated futures contracts were guided lower by the short-end of the curve, assisted further by carbon EUAs which fell from record highs. The price declines were arguably limited by the supply side, however, with LNG imports affected by the cold snap in the United States.

UK Energy Complex | 19 February 2021

Global Last week brought with it some developments regarding the U.K. Emissions Trading Scheme. The Government announced the auction reserve price will increase from £15/tonne to £22/tonne – likely in response to the gains in EUAs already recorded this year. Yet European allowances remain the benchmark and very much intertwined with U.K. energy pricing, as discussed. The Dec-21 benchmark EUA recorded yet another record price on Monday before profit taking saw a bearish trend sustained into the weekend. Technical indicators limited the downside, however, as compliance buyers took advantage of the dips.

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Charlie Strange

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