UK prices rise on increased coal and gas costs

Tuesday 19th April 2022

Market movements remain dominated by questions over Russian gas flows to Western European countries, but whilst prices have moved up in the last fortnight, there has been less volatility. Sanctions on coal and other Russian exports have increased costs and created more reliance on gas generation, while short-term markets have been hit by the twin effects of colder weather and low renewable output – windier sunny weather across the Easter weekend have somewhat rebalanced these indices.

An immediate effect of the Russian invasion has been for the UK government to push ahead with a revised energy strategy – this is based heavily on new-nuclear and off-shore wind. The greater the self-sufficiency the nation achieves in energy, the more insulated we become from external effects such as what is happening in Ukraine. Another war-related development in the past fortnight is the German government taking control of Gazprom Germania (which effectively brings Gazprom’s UK arm under German control too). A key asset of Gazprom Germania is storage, with capacity across various European countries. Controlling the storage has given some comfort in the market for the coming winter, although summer replenishment remains an issue as Russian flows decrease.