Last week: Politics, a cold start to winter and new variant drives market volatility

Market Pulse

It has been a week driven by geo-political tensions, a cold start to winter and dissipating fears surrounding the impact the new Omicron variant might have on the UK and Europe. First of all we have rising concerns surrounding the stability of Eastern Europe as a result of a build up of tens of thousands of Russian troops on the Ukrainian border. This has seen leaders around the world warning of a strong response in the conflict escalates further. Events like these lead to price rises as it creates uncertainty amongst traders who then need to price in a risk premium. It has been suggested that one of the first areas of sanction would involve Nord Stream 2 which puts future gas supply at risk. Gas prices are already particularly volatile due to Europe entering winter with storage at its lowest for 8 years, whilst a colder start to winter than usual has seen stocks reduced a further 12% –  one of the largest drawdowns in the past decade. Storage levels currently sit at 66%, which usually occurs in mid January as opposed to early December. The strongest gains occurred at the beginning of the week with front quarter gas prices increasing by 37p/therm and front quarter power prices increasing by £31/MWh. Since Wednesday, the market has seen this charge pause as a result of strong wind forecasts predicted for the next week or so. At the end of last week UK Baseload Q122 sat at £280/MWh and NBP Q122 251.90p/therm.

Although the European Allowance (EUA) for carbon no longer has a direct impact on the UK energy market, it is still worth mentioning the extreme volatility it experienced last week. Having broken through the €80/mt on Monday morning, we saw front month EUA prices have a dramatic rise and tip above €90/mt on Wednesday. This has been driven by strong technical factors, such as those mentioned above, but also by measures announced by Germany’s new coalition government. These have aligned Germany’s decarbonisation pathway to 1.5C and the market has seen this as a bullish driver for EUA’s. The price of carbon has increased by 50% since the start of November, and has seen Poland calling for a halt on trading of these allowances in order to stop them from continuing to spiral upwards. Interestingly, the market seems to be correcting itself and we saw EUA’s drop to below €83/mt.

Following last week’s dip in UKA’s, we have seen a recovery of prices this week, with the price sat just above £72/mt. This means that despite EUA’s having seen record increases over the past couple of weeks, the UKA is still trading at a premium. There has been no news of the implications of the Cost Containment Mechanism being triggered, but with the deadline on the 14th of December it will be interesting to see how the markets react to whatever the measures, if any, are announced.

Limejump win Grid Edge Award at S&P Platts Global Energy Awards

Limejump, the entech platform, today celebrates picking up the coveted ‘Grid Edge Award’ at the 23rd annual S&P Platts Global Platts Energy Awards, often described as the ‘Oscars’ of energy. Our nomination was for the end-to-end engineering approach and our innovative optimisation of Europe’s largest battery (Minety, Wiltshire), which went live in July 2021.

Our CEO, Cat Newman, who was in attendance, commented: “We are dedicated to achieving our vision of optimising a 100% renewable energy future, and in order to achieve that, we need to onboard and intelligently control both renewable generation assets and flexible energy storage assets. It has been a privilege optimising Europe’s largest battery, the project, from start to go live date, has been a huge collaboration effort between all project stakeholders.” She added ‘Being recognised by S&P Global Platts Energy Awards and the judges is the cherry on the cake, an accolade that the team and I are very proud of.”