What’s happening with the UK power market?

EDF’s James Chaplin explains.

The Big Zero report

Weather and supply uncertainty always cloud the commodity outlook as we enter winter, with global factors also taking a heightened role in recent years as Europe moves towards greater LNG reliance. The level of uncertainty this year is higher than ever amid additional factors taking the headlines, such as the U.S. Presidential Election, Brexit and COVID-19.

Fundamentals have changed drastically over summer, and although some aspects have become a bit clearer over the past few months there are still some key uncertainties:

  1. LNG supply to Europe has finally started to ramp up since late October, after stronger Asian buying demand and global supply issues previously limited opportunity. U.S. supply has returned, however issues still hamper Australian supply. Weather forecasts look to be particularly important this year, with a high chance of La Nina potentially bringing colder weather to key demand hubs in Asia.
  2. European carbon contracts have been pressured by a lack of buying demand amid further lockdowns and an uncertain economic outlook, with traders taking a ‘risk off’ approach through October. With Europe set for a green recovery could future regulation help support the market, and how will Brexit impact the overall carbon price in the UK from 2021?
  3. French nuclear availability has improved recently, lowering the risk of tight margins this winter and reducing the need for UK exports.  However, any potential changes to Europe’s supply mix, especially at times of low renewable output, could drive volatility.
  4. Potential further lockdowns and demand changes due to COVID-19 will remain a high risk through winter and beyond.

These points only scratch the surface of the market drivers this winter, so I’m sure you’re wondering how you can stay on top of the wholesale energy price as it changes, especially in uncertain times like these?

Energy is a complex business, but hopefully we can make it simpler. You can keep informed on the changing prices through us at EDF. Join our free bi-monthly webinars on the UK Power Market with James Chaplin, Power & Gas Trader in the Portfolio Hedging team.

The next one is coming soon, on 17 November 2020 at 3pm. Don’t miss out! Sign up here.

In the meantime, watch James run through the factors that influence the wholesale price of power – what they are, how they work, and what to look for – in more detail.

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