Market conditions remain extremely volatile as the flash updates across the last fortnight have demonstrated. The fundamental drivers remain the same in that a lot of risk is being built into gas and power wholesale particularly for the coming winter season due to low gas storage and LNG flows coming into Europe. We saw a massive spike last week due to the fire at the France-UK interconnector meaning power imports to the UK will be compromised (conversely, this also restricts exports, so were UK renewables to pick up for example, there could be a bearish effect from the compromised cable). As a result of the fire, the UK has switched to import mode on interconnectors to elsewhere in continental Europe and Ireland.

Power generation was stretched in the last week fortnight due to very low wind output. As such, coal-fired generation was brought back online, which of course fills the generation gap, but is also much more carbon-intensive.

The extreme costs we are seeing on wholesale is not just bad news for the end user but is also having a critical effect for several smaller domestic energy providers – these suppliers are not generators, so a surge in wholesale has left them supplying energy below market rate and has led to some going under. The government has offered support, but this does not change the fundamentals of the market, dictated by international movements and trends (e.g. low Russian gas flows to Western Europe).

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