The price of power: What influences the wholesale price of energy?


Energy is a complex business – especially when it comes to pricing. In this sponsored post EDF outlines the macro factors at play, and how businesses can get ahead of the curve with a series of free webinars.

Here at EDF we are committed to providing customers with as much information as possible, on all aspects of their energy consumption.

The wholesale energy complex is ever-evolving and fundamentals have changed drastically over the past few years. From the winter power price spiking above £75/MWh in 2018, to prices plummeting below £40/MWh this winter.

So what has driven this drastic shift?

  1. Liquefied Natural Gas (LNG) liquefaction capacity has ramped up over the past couple of years, with new projects opening in the U.S., Russia and Australia. This has flooded the global market with gas, with demand not able to keep pace. In the UK, LNG imports have been continually breaking records month-on-month, whilst further supply growth is expected over 2020.
  2. Mild temperatures this winter and last winter has kept demand subdued and allowed European gas storage levels to remain high.
  3. Supply risk surrounding the end of the old Russia-Ukraine gas transit agreement failed to materialise as both parties settled on a new 5-year agreement late in December.

All of this without mentioning movements across other commodity markets. Brexit uncertainty has played a major role in volatile currency and carbon markets, whilst global economics and geopolitics has driven the oil market. The increase in renewable projects commissioning has also helped add low-carbon capacity to our grid, with coal stations closing.

We have also seen changes to how power is traded in the UK, with Ofgem suspending the Secure and Promote Market Making Obligation (MMO) with effect from 18 November 2019.

After all that I bet you are wondering how you can stay on top of the wholesale energy price as it changes?

Energy is a complex business, but hopefully we can make it simpler. You can keep informed on the changing prices through us at EDF. Join our free bi-monthly webinars on the UK Power Market with James Chaplin, Power & Gas Trader in the Portfolio Hedging team.

The next one is coming soon, on 5 February 2020 at 3pm. Don’t miss out! Sign up here.

In the meantime, watch James run through the factors that influence the wholesale price of power – what they are, how they work, and what to look for – in more detail.


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