UK power prices fell to their lowest in four years during the first quarter of 2015 and averaged 10% lower than the previous quarter. Analysis by pricing firm ICIS underlines how global oversupply of gas is driving down UK prices.
Latest data from the ICIS Power Index (IPI), which reflects wholesale power prices over a year of delivery, shows prices have declined to their lowest point since the start of IPI calculation in 2011, hitting its lowest level to date on 26th January at £43.573/MWh.
For Q1 as a whole, the IPI averaged £45.10/MWh – 10% less than the IPI’s average for Q4 2014 of £50.40/MWh. The Q1 2015 average was also 6% lower than the lowest previous quarterly average since the IPI’s first calculation, in Q3 2012.
ICIS analysts said continued gas oversupply, with rising production of liquefied natural gas (LNG) around the world and more coming to the UK, was the key driver, alongside the influence of other global markets such as Brent crude oil and coal.
“Wholesale energy market prices are under increasing pressure from macroeconomic factors,” says Zoe Double, head of power, ICIS. “The UK is now part of a truly global gas market with more liquefied natural gas availability, and oversupply on energy markets elsewhere in the world is having an impact on wholesale energy prices here, with the fall of Brent crude oil and lower coal values.”
ICIS first quarter analysis suggests that the trend of increased LNG imports is likely to continue with macroeconomic indicators also pressuring UK energy prices.