Future of Energy

2019: What’s in store for the UK energy market

Posted on 30 January 2019
By Ben Spry
Ben Spry
Head of Risk Management

Ben manages the operational delivery of our risk management services, including the award-winning Optimisation Desk and its new suite of Demand Side Response products.

Will the Beast from the East return and send gas prices sky rocketing? Will unplanned outages in the French nuclear fleet put pressure on UK power markets? Or will the slow down in the global economy result in a downward trend for wholesale energy costs?

Sadly, we cannot predict these events or their possible impact with any certainty. But the market experts on our Optimisation Desk have identified a range of key factors and potential scenarios to provide an overview of what to look out for over the coming year in their 2019 Market Outlook report.

Weather driving gas demand

The weather, of course, remains a key driver for energy prices. And it’s anticipated that the current cold conditions are set to continue, with the risk of it getting colder come February. Unsurprisingly, this would increase demand for gas as well as power.

While the UK does have a diversified portfolio of natural gas imports, we still don’t have sufficient storage to provide much of a cushion in an extended cold period. As we move from coal to more gas-fired power generation, our requirements are also increasing.

But demand for Liquefied Natural Gas (LNG) in Asia has been lighter this winter than last, so more tankers have been coming our way. And we have upgraded a key coastal terminal, so can now accept tankers from countries other than just Qatar.

Less pressure on power?

If good supplies of LNG combine with milder than expected weather, we are likely to see less pressure on power prices, which have risen substantially during 2018.

UK Renewable generation is also set to increase, with more solar and wind projects in the pipeline.

But growing carbon levies will add cost.

Global slowdown cuts oil production

When it comes to oil – which impacts both the power and gas markets – the slowdown in global growth, particularly in China, has impacted demand. As a result, OPEC members and Russia have cut production.

But we still anticipate a well-supplied market which should help to keep prices lower.

However, with so much uncertainty on so many fronts – both at home and in the wider world – we anticipate a great deal of volatility across all energy commodities.

Other key factors under analysis

The 2019 Market Outlook also explores the potential impact of:

  • Changes to the power mix on the Continent

  • Developments to the UK’s gas and power interconnectors

  • The foreign exchange market

  • Energy policy decisions

  • Ofgem’s forthcoming Targeted Charging Review

  • And of course, Brexit

You can also hear the personal views of three of the Optimisation Desk’s Client Portfolio Managers and see if they predict bullish or bearish conditions for the year ahead.

To get your free copy of the 2019 Market Outlook, you can download it from Risk Navigator (for existing Ops Desk customers). Or visit Head of Risk Management Services Ben Spry’s LinkedIn page to download an abridged version that’s free to all energy consumers.

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