Power Annuals rise on lower wind and nuclear output
Wednesday 19th August 2020
The first part of August has been distinctly bullish across both short-term and Annual energy wholesale markets. A key driver has been tightness in generation, with extended nuclear outages across the UK fleet and continental Europe. This has happened when cooling demand increased due to the European heatwave. At the same time, renewable output has been down, with particularly low wind speeds. Hence gas generation has increased (boosting the wholesale price) and the UK has even been forced to restart coal-fired generation for the first time in two months. Gas prices have also increased on the back of lower Norwegian pipeline flows and increased storage replenishment in Europe. We have also seen fewer LNG imports in recent weeks as LNG prices rise in Asia and producers choose to sell into that more lucrative market.
Whilst energy prices remain buoyant at present, the change in weather may have a corrective effect. The low pressure system from the Atlantic will cool Europe to close to seasonal norms, thus reducing cooling demand. Wind speeds should also increase to add some much needed renewable generation to the mix (although the cloudy weather will of course compromise solar output).