This month has continued to see gains in UK Gas & Power prices across the curve with surging carbon, coal and European markets. Oil has however not been a significant factor with crude oil prices actually falling, although we may see oil recover as oil sanctions against Iran take effect.

We have seen EUA (CO2 emission allowance) market has also increased to the highest level seen since 2008, caused by speculative buying ahead of next year’s market reform. We have also seen coal prices increase helped by improved Chinese buying along with Turkeys near tripling of tariffs on US coal meaning an increase in Russian coal prices and in general European coal prices.

The majority of the causes of increases we believe have been caused by gas prices increasing amid outages during maintenance season and strong unusual seasonal demand caused due to a lack of wind out put on the electricity grid. This has intensified gas supply fears for the coming winter which is adding risk premiums into prices, this can be seen in short term prices trading higher than longer term prices further out on the wholesale curve.

With the above in mind it is our view that prices are curtly overpriced due to speculation and fears of gas supply, as we move out of the UK summer heatwave with less cooling demand and wind output returning to normal along with the end of gas maintenance season we could well see improved gas figures for this winter and if we move through October & November with milder weather it is likely that we could see prices easing as risk premiums are removed and confidence returns to the markets.

ESOS 2

As you may be aware phase 2 of the Energy Savings Opportunity Scheme (ESOS) is upon us with the deadline for completion 5th December 2019 but applicants can start the process now. ESOS regulations set a target of saving 20% of energy consumption by 2020 and is managed by the environment agency Public sector are not required to comply.

Any UK organisation (and corporate group members within UK) must comply with ESOS regulation if they have 250 + staff with a turn over €50 million(£38.9m) and an annual balance sheet €43 million (£33.5m). Failure to comply by the deadline can lead to financial penalties. UKAS accredited ISO 50001 customers comply with ESOS already but you do have to notify the Environment agency before the deadline and register evidence.

If you believe you will be required to be part of ESOS 2 and would like The Energy Network to provide support on this as part of a tailored package through a lead assessor, please contact your account manager and ask for details.

We are continuing to track the markets both short and long term and should we feel any action is required your account manager will be in touch, if in the meantime you would like to discuss the markets in more detail and an idea of forward costs, please let me know and I will ask your account manager to contact you.