UK Gas & Electricity Market Overview: August 2024

17/09/24

The energy market’s bullish run across Spring-Summer 2024 appeared to have reached a peak by mid-August, before stabilising and receding slightly towards the month’s close. Although the UK and Europe experienced a period of strong fundamentals, with milder than average temperatures, reduced industrial demand and stable Norwegian gas flows, these were not enough to ease the upward market pressures from the mounting geo-political issues and their potential impacts on global supplies.

EU's 90% capacity target acheived

By mid-August, European gas storage had surpassed its 90% capacity target and was ahead of schedule by a remarkable two months. This was achieved through both weak domestic demand – above average yet stable temperatures with limited consumption shocks caused by unexpected episodes of extreme weather, and industrial – continental manufacturing activity remaining below historical norms. On the supply side, the first portion of the Norwegian maintenance season has been navigated well, providing a reduced but stable supply, while the low appetite for LNG imported has limited the effects of increased competition from the Asian market.

Concerns over future global supply

However, increased geo-political tensions in both the Middle East and Russia-Ukraine continue to cause concern around potential future global supply issues. As the Middle Eastern crisis escalates, the markets wait anxiously to see whether the Red Sea will remain a safe route for global shipping – or if delays or obstructions could impact supply routes. In the Russia-Ukraine conflict, both sides persist with targeting energy infrastructure to exert maximum disruption, though as all European gas and power systems are intricately linked, there are fears a major blow would affect the whole continent.

UK maintains a balanced power system

The UK power mix has remained balanced across the summer, with gas providing the majority at an average of 30-40%. Renewable generation has fluctuated, although there were occasional spells of strong wind generation helping to provide over 40% of the power mix, it has mostly remained a weak period for renewables. However, despite wet weather, stable temperatures have endured helping to maintain a balanced system and negate the upward pressure linked to the gas markets. Following a drop in the UK Emissions Trading Scheme (UKETS) price through July, the price rebounded in August, sitting at £44/tonne by the month’s close.