Gas and power markets have seen extreme volatility in the last couple of weeks, particular the day-ahead and intraday power markets. Last Tuesday saw a National Grid Capacity Market Notice, briefly sending the price to £1,090/MWh (for context, this would typically be around £50, and the effect was more pronounced than during the Beast from the East supply issues). The surge in cost was caused by increased cooling demand during the mini-heatwave at a time of negligible wind speeds. Renewable output was replaced by coal- and gas-fired generation, which in turn boosted the gas price.

Further out, Annuals have been affected by an increase in the cost of carbon. The EU reset its CO₂ emissions target from 40% to 55% of 1990 levels and will also now include shipping in the EU Emissions Trading Scheme (EU ETS). Greener technology to achieve this target will involve greater costs, and carbon allowances form part of this. However, at the time of writing, carbon is easing, as traders perhaps overbought.

Annual power and gas prices have also been affected by extended outages across French and UK nuclear power stations – this has been an ongoing issue for several months now. There are also potential fuel stock problems for the coming winter as there is a high probability of a La Niña weather event – this generally causes increased rain and thus coal mining issues in South America and Australia.

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