As the temperature starts to drop, energy buyers turn their attention to what the winter has in store – and whether we’re looking at the possibility of another Beast from the East to send energy prices sky high.
Clearly, no one can say for sure. But thankfully, the team of market experts on our award-winning Optimisation Desk have been looking at all the factors that are likely to influence energy prices this winter.
These are summarised in their annual Winter Outlook report (which you can read for yourself – details below).
From the weather to Brexit
In the report, the team look at the potential impact on prices of:
- The weather – both short and longer term
- Wind levels
- UK gas and power demand
- The role of coal
- Gas supply and storage
- The changing landscape of UK power generation (and we’re not talking renewables)
- Global demand
Get set for a cold winter
In brief, early forecasts suggest we are heading for a cold winter, which has already added a premium to Winter 18 gas and power contracts.
Meteorologists are pointing to a weakening band of pressure around the Arctic’s Polar Vortex that could send cold air heading our way later this month and into November.
If this combines with any problems in French and Belgian nuclear availability and lower-than-anticipated wind output, we could see energy prices heading sharply upward.
Pluses and minuses
On the plus side, gas demand is expected to be lower than 2017, with relatively cheaper coal-fired generation expected to fill the gap for power generation.
The UK’s medium-range gas storage is also looking relatively well supplied as we head into winter.
And we have strong capacity booked via two of our main gas pipelines from mainland Europe. But any unforeseen outages could lend support to prices.
However, there is likely to be fierce global competition for Liquid Natural Gas (LNG), so tankers can easily divert to Asia if more favourable prices can be obtained.
The pound is also increasing in volatility – and a further fall in value will make both gas and power more expensive.
Market expertise on hand
Existing Optimisation Desk customers can download the Winter Outlook report in full from the Documents section of Risk Navigator. Otherwise, contact the Ops Desk direct to request a copy via Optimisation.Desk.Team@npower.com.
Remember, the Ops Desk team is also on hand to offer twice-daily updated market intelligence and expertise to facilitate effective purchasing.
So if you need more support to negotiate the best price outcome for the winter ahead, do get in touch at the email address above to find out how they can help.