The ICIS Power Index Q4 2016 analysis shows UK energy values have risen to their highest levels in 18 months.
UK wholesale energy market prices have continued to climb in Q4 2016, prompted by concerns over gas storage levels and tighter power margins, according to analysis of the energy markets published by ICIS, the independent authority on energy market pricing.
Technical issues have prevented the UK’s largest gas storage facility from operating at full capacity during 2016, which has pushed gas reserves to their lowest in more than 20 years. Meanwhile UK electricity margins remain tight, boosting short-term prices to record levels with concerns over potential shortfalls.
The ICIS Power Index (IPI) averaged £45.937 per megawatthour (MWh) over Q4 2016, the highest quarterly average in two years. Gas for delivery over the next year averaged 45.018p/th, its highest in 18 months.
‘Gas storage levels in the UK have fallen to their lowest since market liberalisation in the 1990s, but Europe’s overall gas storage situation remains comfortable and is available to supply Britain via the Interconnector pipeline with Belgium if required,’ says Ben Wetherall, Head of Gas at ICIS. ‘There is strong demand for gas to generate electricity, but if prices rise, the global market is flexible enough to respond with additional supply.’
‘The UK’s electricity margin continues to cause alarm, leading to high short-term prices and encouraging market participants to factor in greater price risk for next winter,’ says Zoe Double, Head of Power at ICIS. ‘However, the government’s capacity market is providing support for plants that are marginally profitable for next winter, and concerns over French nuclear supply are also expected to ease over the next few months.’
The ICIS Power Index delivers independent insight into the complex world of wholesale power prices for both households and industrial electricity consumers, based on real market trading.
The ICIS Power Index is updated every working day and is freely available from the ICIS website, along with ICIS’ quarterly analysis of price trends and volumes.
Tara Sabanandan, Marketing Manager, ICIS
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ICIS is an independent price reporting agency focusing on global energy, petrochemical and fertilizer markets, and we have covered the complex UK electricity market for nearly two decades. Every day, we assess electricity contracts for more than 40 different delivery periods in the UK market alone. The analysis and data that we produce is widely used as a reference price in energy contracts.
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