What’s affecting gas and electricity prices at present?


Over the past year fundamentals effecting the wholesale energy market have changed drastically with weather, LNG supply, Brexit and COVID-19 at the forefront. Back in March 2020 the winter 2021 power price reached down to £42/MWh but recently broke a new high of over £70/MWh.

In January we saw a competitive LNG supply market and cold weather driving up gas prices, while a tight UK power market led to prompt volatility. But what has caused prices to continue up as we enter summer?

After an unseasonably cold winter and low renewable output in April requiring further withdrawals, European gas storage levels have been left depleted. Storage levels currently stand at around 29% full, compared to 59% in 2020 and 45% in 2019.

  • Despite LNG supply ramping up over the past few months, there’s still uncertainty over summer with potential competition for supply between Europe and Asia.
  • Nord Stream 2 completion remains uncertain, with lower pipeline flows putting more pressure on gas storage to fill up this summer.
  • Geopolitical risk to gas supplies into Europe has been added by rising tensions between Russia and Ukraine.

Since early November carbon has been on a bull run due to the expectation of further regulation to tighten the market. Both the EU and UK have set more ambitious targets to cut emission, with their respective emission trading schemes seen as a key way to drive the change.

  • How the market will react at the start of the UK carbon scheme on 19 May adds additional uncertainty.

As always in the forward market outlook there are still several uncertainties, especially with focus shifting to more global supply/demand factors. It’s likely that close attention will be paid to gas flows and storage levels over the summer, as well as nuclear availability, as market participants predict the likelihood of potential restrictions in the winter to come.

These points only touch on the current market drivers, so I’m sure you are wondering how you can stay on top of the wholesale energy price as it changes, especially in uncertain times like these?

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 May 2021 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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