Is the energy crisis really over? The downward trend of energy prices in the first three months of the year could be set for reversal
- Q1 2023 – Power: the downward trend in gas prices, coupled with lower demand resulted in lower than expected electricity prices in Q1 2023.
- Q1 2023 – Battery storage: Storage revenues in the UK were negatively impacted from the beginning of 2023 by the lack of volatility in power wholesales as well as an increase in competing battery suppliers in the market.
- Q3-Q4 2023 – Power: The power price outlook looks set to change as the year progresses, due to expectations for dry weather to impact hydro and the levels of rivers used to cool down thermal and nuclear plants; French nuclear availability continues to be in question caused by continuing industrial action, delaying plant maintenance to the second half of the year.
Milan, 27 April 2023 – A 50% reduction in UK gas prices was experienced in the first quarter of 2023, after a combination of mild winter temperatures, low industrial and domestic demand and oversupply of gas. This is according to a report by Renantis, which analysed energy price trends from the first quarter of 2023.
As the recent winter came to a close, the level of gas storage in Europe was higher than normal at 55%, driving the reduction in gas prices. The considerable amount of stored gas will facilitate the supply process, which started in April, in preparation for the coming winter.
The report highlights that battery storage revenues in the UK reduced in Q1 compared to the previous quarter. On the wholesales market, prices have stabilised, narrowing the gap between the charge hour and the discharge hour prices. On the ancillary markets, National Grid requirements have remained stable, but supply has been flooded by the volume of new batteries installed which has reduced clearing prices.
Despite the downward trend in 2023 so far, the forecast for the summer suggests a turning tide. Scarce hydro reserves and low water levels in the rivers used to cool thermal and nuclear power plants could lead to higher prices. In addition, the availability of French nuclear power is called into question by the ongoing industrial action across France, which could see essential plant maintenance pushed into the second half of the year. This disruption could cause a further increase in prices across Europe.
Anticipated drought conditions, alongside OPEC’s cut in oil production, will play a key role in setting energy commodity prices, reinforcing the continued impact of climate change on the energy market.
Luca Prosdocimi, Head of Trading and Dispatching at Renantis comments: “Our first report of 2023 illustrates that the energy crisis is far from over. The UK has had some respite due to the particularly mild winter, during which it increased the import flow of liquefied natural gas – LNG. Looking ahead, we may see significant repercussions of the hydro crisis that is has been affecting central Europe throughout the rest of 2023”.
You can read the full report by clicking here.
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