Interconnector exports dropped to near zero last week. Flows are expected to shortly switch to imports as UK gas prices rise to attract more supply from Europe. Balance of winter gas contracts are also higher across the week, with forecasts indicating below seasonal-normal temperatures across the UK this week. Low wind levels and planned nuclear outages have also increased gas for power demand, with gas providing over 60% of supply last week. Longer-dated gas contracts have also been supported by higher oil prices, with Brent hitting highs from more than two years ago. Annual contracts, however, were marginally lower across the week, having failed to test their September highs. Medium-range storage is over 90% full and Rough storage sendout has continued, but the reduced reserve levels will leave the UK more dependent on pipeline imports and LNG deliveries this winter, which is increasing prices as we head further into the winter.
Day-ahead power prices rose above £50/MWh as higher demand and low wind levels tightened supply margins. Peak power demand jumped 4GW to highs of 46GW. The end of half-term holidays, cooler temperatures and the clock change – which cut evening daylight hours – contributed to the large jump in consumption. Wind levels briefly dropped to lows of 500MW last week and the generation mix relied on gas and coal burn to provide over 70% of electricity. Planned outages at both Sizewell B reactors for the next five weeks cut nuclear availability by 1.5GW. This added to the demand for gas and coal burn in the fuel mix. Price movement was more gradual on the forward contracts, but the curve remained supported by higher coal prices. Coal prices for 2018 are at new multi-year highs of around $87/tonne which is increasing the cost of coal-fired generation.