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Chart of the Week

2020

Prices rise for SMEs as energy demand grows

Sam Holland Analyst

Over the last six months our Pricing in the SME Gas and Power Markets reports have tracked a recovery in SME prices, following 5 consecutive quarters of price reductions. In this Chart of the Week, we look at the trends in energy prices in the SME sector and how they might change in the near future. Figure 1 shows one-year acquisition prices for 25MWh SME gas contracts and 6MWh SME electricity contracts. In 2016, rising wholesale costs led to increasing SME prices. This continued in 2018 as rising third-party costs combined with cold weather from the Beast from the East in February 2018 to move prices higher. Prices for SMEs then fell steadily in 2019 after a milder winter led to oversupply in the gas markets, and reductions continued through the first half of 2020 due to COVID-19 associated falls in demand. However, in the three months to 03 November 2020, average SME gas prices increased by 5% for 25MWh contracts, while SME power prices for 6MWh contracts rose by 10%, following an upward trend in wholesale prices. From 4 August to 3 November day-ahead gas prices rose by 159% to 37.75p/th, finding support from declining temperatures, alongside 20-month high LNG prices caused by adverse weather in Asia and North America. Across the same period day-ahead power prices increased by 73% to £52.75/MWh as demand for power showed continuing signs of recovery. Despite the second national lockdown, SME prices remained steady during November with suppliers applying small price adjustments. Lower temperatures offset reduced gas demand and resulted in day-ahead gas prices averaging 37.74p/...

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