Innovative Energy Consultancy Ltd
Innovative Energy Consultancy Ltd

Monthly energy update

A collapse in the price of CO2 emissions allowances (EUAs) has counteracted the effect of firmer oil and gas markets on UK power prices in recent weeks, leaving Annuals stable to marginally higher than where they were in mid-January.


In electricity, EUA prices halved in the second half of January, following the cancellation of an auction of four million EUAs by Germany, due to insufficient interest and amid fresh concerns of oversupply and growing uncertainty over market intervention. 2013 EUAs slumped to EUR 3/TC02 as a result, as faith in the emissions trading scheme evaporated. Prices have since rebounded to around EUR 4.4/TC02, on the back of Germany indicating that it is looking to cut renewable energy subsidies, which could increase EUA demand, and on speculation that Germany may vote to support ‘backloading’ – the temporary withdrawal of allowances from the market in order to tighten supply.


Oil prices have been rising – gaining 5% on the back of increased Middle East tensions following an Israeli air strike in Syria. This, along with a related 2% rise in gas prices, has conversely provided uplift to UK power discussion.


Coal prices meanwhile have remained broadly stable, weak buying interest being counterbalanced by strike action in Colombia and flooding in Australia, keeping 2014 European coal prices bubbling just above $100/tonne. In gas, a compressor problem at Norway’s largest gas field, Troll A, which will reduce Norwegian exports by up to 37 mcm/day – or more than 10% – until the start of April, has helped boost prices across the coming months. However, a drop in demand due to an unseasonably warm end to January offset the immediate impact of this.


Meanwhile, Annual prices have broken out of the longstanding price channel that has established itself since August, pushed higher by Middle East tensions and rising oil prices – with April ’13 Annual heading towards 68 p/th and the April ’14 Annual towards 69 p/th, their highest levels in 10 months.


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