Each week this summer, Sam Peek and colleagues in Cornwall Insight’s Assets and Infrastructure team have tracked the seemingly inexorable rise of wholesale price in the Energy Market Bulletin. The latest issue covers the all-time high spot power and gas prices with day-ahead prices up 10-fold (ten as they write on the football vidiprinter) a year ago. These increases are now firmly on the political and economic agenda and this morning I had the chance to discuss them on Radio 4 Today’s business news this morning (link here 22 minutes in).
It’s always a privilege to get these interview opportunities and interesting to talk to the different journalists on the issues they are covering. Led by our PR and Press Officer Charlotte Nelson, Cornwall Insight experts regularly contribute to different media.
This morning on Radio 4 Dominic O’Connell clearly knew his stuff and his questions made for a wide-ranging conversation. The interview managed to touch on rocketing gas and coal prices, reformed EU ETS, the immediate impact of these higher costs on businesses, the prospects for the domestic Default Tariff Cap, energy supplier stability and margins, the capacity market and what will replace coal when it is fully off the GB power system.
The discussion was much more wide-ranging than I had expected, as my notes below show what I intended to say:
- “Gas prices are at record levels due to very high demand from Asia and Europe seeking to replenish stocks after last winter. This is still not complete. Russian gas flows in to Europe have also been lower and there have been outages with Norwegian supplies. UK is bidding in competitive market for LNG cargoes and has low levels of gas storage of its own.
- Carbon prices are also very high and even at these very high prices are encouraging European generators to switch to gas from coal, thus bidding up gas prices more.
In GB power, generation margins are tighter than usual due to nuclear and gas outages/shut downs. Wind output has also been lower.
- The consequences of the above are record high and volatile wholesale energy prices and the outlook is for higher bills for all consumers, potentially significantly more than seen with the October price cap come April 2021. Some energy suppliers will struggle to make it that far as they are squeezed between the very high wholesale prices and the maximum charge level set by the cap.
- Our best hope is for a mild winter!”