UK energy prices

[scotview]

Just submitted our October energy readings to Scottish Power. I've shown my energy use kWh and energy cost £ on the chart below. A couple of observations.

1 Our electricity use is pretty stable throughout the year. We have a BEV. We are thinking about storage batteries but not sure how much energy we'll save.
2 As we go into winter I don't see our gas use reducing so the cost will rise significantly. Some people are going to get a shock. I can still personally do quite a bit with exploiting our zone heating but the our comfort wins over cost, for the moment.
3 The graphic shows the increase in energy cost, you can see the October default tariff increase kicking in. I am still of the opinion the energy is cheap and we can personally mitigate costs further if need be.

[odysseus2000]

Price of natural gas falls to levels last seen in January:

https://tradingeconomics.com/commodity/uk-natural-gas

This should filter to domestic & commercial prices for gas & electricity, but we will see if the companies practice more gouging!

Spot price doesn't count for much - all it says is that Europe managed to fill its storage this year and it's been super-warm in October, parts of Spain have been over 35C. Even so the outlook for Europe is incredibly sensitive to the winter weather - a mild winter would see them managing on their stored gas, but it wouldn't take temperatures much below average for Germany to be rationing gas by the end of the winter. As ever, the UK's lack of storage means that it's linked to European pricing but will be more volatile.

But further out the curve doesn't look great - CME is your best bet for showing prices into 2025 even if there's not huge liquidity out that far, but ICE has nicer charts to see how pricing for earlier months has changed :
https://www.cmegroup.com/markets/energy ... month.html
https://www.theice.com/products/910/UK- ... 154&span=3

For all the talk of the front month briefly going below £2 a few days ago, January 2023 is currently looking at 367p, Jan 2024 is 357p and Jan 2025 is 270p. All we can really do for this winter is cross fingers that it will be a mild one (although I've seen forecasts that suggest we will be getting some "Beast from the East"-style icy blasts, hard to forecast this far out though). But the winter of 2023/4 looks really difficult - too soon for significant new supply to come through, but Europe will be hoovering up any LNG it can find to fill its storage in the absence of much supply from Russian pipelines.

Right now the real squeeze seems to be on middle distillates - diesel, kerosene and heating oil - of which traditionally we've imported a fair bit from Russia and it's not easy for other countries to reconfigure refineries to make a lot more of (although they can tweak a bit). I'd certainly be filling up my tank with heating oil if I hadn't already.

The great uncertainty over gas prices is what happens in Ukraine.

Will the West continue to support Ukraine or will it decide it is better to be friends with Russia? Any hint of a thaw in West/Russia and the price of natural gas collapses.

Regards,

[Hallucigenia]

The great uncertainty over gas prices is what happens in Ukraine.

Will the West continue to support Ukraine or will it decide it is better to be friends with Russia? Any hint of a thaw in West/Russia and the price of natural gas collapses.

It's not "the West" that matters, it's Europe. Putin could be having tea on the floor of the Senate and it wouldn't put a single therm of gas in a European pipeline. So that makes it a question of the politics of Europe, and of Brussels, and right now they seem pretty determined to weather the storm - there's a general recognition that it was a huge mistake to become so dependent on Russia, plus there's many on the Continent who see this as an opportunity to push the twin agendas of renewable energy and energy efficiency, so it doesn't look like they're going back to the previous status quo. German gas consumption is currently 40% down on the average for the time of year, helped in part by the warm weather but also reflecting a determined effort to save gas.

It looks like they should be good for the winter unless it's a really bad one, so the probability is that the gas weapon has been neutralised until maybe April-May when they have to start thinking about how to fill the storage for next year, which in turn will depend on how much is left of the current brim-full levels after winter. And it's hard to see the war ending without serious instability in Moscow, which isn't going to help.

The fact that Nord Stream remains damaged and would take a while to fix and recertify also limits how much gas can physically be delivered.

As I say - for now I'd concentrate on diesel stocks.

[scrumpyjack]

The great uncertainty over gas prices is what happens in Ukraine.

Will the West continue to support Ukraine or will it decide it is better to be friends with Russia? Any hint of a thaw in West/Russia and the price of natural gas collapses.

It's not "the West" that matters, it's Europe. Putin could be having tea on the floor of the Senate and it wouldn't put a single therm of gas in a European pipeline. So that makes it a question of the politics of Europe, and of Brussels, and right now they seem pretty determined to weather the storm - there's a general recognition that it was a huge mistake to become so dependent on Russia, plus there's many on the Continent who see this as an opportunity to push the twin agendas of renewable energy and energy efficiency, so it doesn't look like they're going back to the previous status quo. German gas consumption is currently 40% down on the average for the time of year, helped in part by the warm weather but also reflecting a determined effort to save gas.

It looks like they should be good for the winter unless it's a really bad one, so the probability is that the gas weapon has been neutralised until maybe April-May when they have to start thinking about how to fill the storage for next year, which in turn will depend on how much is left of the current brim-full levels after winter. And it's hard to see the war ending without serious instability in Moscow, which isn't going to help.

The fact that Nord Stream remains damaged and would take a while to fix and recertify also limits how much gas can physically be delivered.

As I say - for now I'd concentrate on diesel stocks.

I think by next year Europe will have hugely increased the ability to receive gas from elsewhere and so there will not be the same problem next winter. LNG receiving facilities are being built as well as increased storage. The large fall in gas futures prices reflects that expectation

[BullDog]

The great uncertainty over gas prices is what happens in Ukraine.

Will the West continue to support Ukraine or will it decide it is better to be friends with Russia? Any hint of a thaw in West/Russia and the price of natural gas collapses.

It's not "the West" that matters, it's Europe. Putin could be having tea on the floor of the Senate and it wouldn't put a single therm of gas in a European pipeline. So that makes it a question of the politics of Europe, and of Brussels, and right now they seem pretty determined to weather the storm - there's a general recognition that it was a huge mistake to become so dependent on Russia, plus there's many on the Continent who see this as an opportunity to push the twin agendas of renewable energy and energy efficiency, so it doesn't look like they're going back to the previous status quo. German gas consumption is currently 40% down on the average for the time of year, helped in part by the warm weather but also reflecting a determined effort to save gas.

It looks like they should be good for the winter unless it's a really bad one, so the probability is that the gas weapon has been neutralised until maybe April-May when they have to start thinking about how to fill the storage for next year, which in turn will depend on how much is left of the current brim-full levels after winter. And it's hard to see the war ending without serious instability in Moscow, which isn't going to help.

The fact that Nord Stream remains damaged and would take a while to fix and recertify also limits how much gas can physically be delivered.

As I say - for now I'd concentrate on diesel stocks.

I think by next year Europe will have hugely increased the ability to receive gas from elsewhere and so there will not be the same problem next winter. LNG receiving facilities are being built as well as increased storage. The large fall in gas futures prices reflects that expectation

Probably another three years before new LNG import terminals come on line. I would be investigating floating LNG regasification vessels if I were the German authorities. Though I am not sure there's any presently not on hire. Quicker to build new floating facilities than land based though anyway. Starting today you might get a vessel delivered and working in two years if there's a Chinese shipyard available.

[scrumpyjack]

Germany will have 5 Floating LNG terminals by next winter
https://www.euractiv.com/section/energy ... -terminal/

[Hallucigenia]

I think by next year Europe will have hugely increased the ability to receive gas from elsewhere and so there will not be the same problem next winter. LNG receiving facilities are being built as well as increased storage. The large fall in gas futures prices reflects that expectation

No - apart from as I said, the big fall is in spot prices because of a spectacularly warm October at a time when storage is already full. But prices even a few months out haven't moved nearly as much.

And whilst you obviously need receiving facilities, the limiting factor is supply - you can't just rustle up 20bcm or more of gas out of nowhere. That's why Mr Market thinks that next winter will still be difficult, but things may be starting to get easier - if still not back to "normal" - by the winter of 2024/5.

And things could still get worse - Russia could pull the 10-12 bcm going through the trans-Ukraine pipeline, or the 20bcm/year going to Europe via LNG, or the 15bcm/year going through Turkstream. Rystad have done some modelling on that kind of thing (needs Economist sub or the ability to read HTML, the full article is in the source code....) :
https://www.economist.com/finance-and-e ... -from-over

Of course it depends somewhat on what happens in Ukraine - I'd say it's probably 60:40 that active military operations will have ceased one way or another by the summer, but then the real fun begins. I'd say it's an evens bet whether Russia will have the same borders in 3 years time as it did before 2014 - with Chechnya being the obvious starting point for a second round of succession from the Muscovite empire, maybe Dagestan as well. And the Muscovite president's life will probably be easier if Chechnya goes than if it stays...

[BullDog]

Germany will have 5 Floating LNG terminals by next winter
https://www.euractiv.com/section/energy ... -terminal/

Good news for them, they must have paid very handsomely! Buys them time to build the on shore import infrastructure they desperately need.

[BullDog]

I think by next year Europe will have hugely increased the ability to receive gas from elsewhere and so there will not be the same problem next winter. LNG receiving facilities are being built as well as increased storage. The large fall in gas futures prices reflects that expectation

No - apart from as I said, the big fall is in spot prices because of a spectacularly warm October at a time when storage is already full. But prices even a few months out haven't moved nearly as much.

And whilst you obviously need receiving facilities, the limiting factor is supply - you can't just rustle up 20bcm or more of gas out of nowhere. That's why Mr Market thinks that next winter will still be difficult, but things may be starting to get easier - if still not back to "normal" - by the winter of 2024/5.

And things could still get worse - Russia could pull the 10-12 bcm going through the trans-Ukraine pipeline, or the 20bcm/year going to Europe via LNG, or the 15bcm/year going through Turkstream. Rystad have done some modelling on that kind of thing (needs Economist sub or the ability to read HTML, the full article is in the source code....) :
https://www.economist.com/finance-and-e ... -from-over

The LNG is definitely out there. You just have to outbid everyone else for it. The liquefaction plants are tied to long term supply contracts for their bread and butter. But they make the big money from the spot cargoes they sell due to the plants having more than their contract capacity. So, the gas is out there. Highest bidder gets it.

[Hallucigenia]

The LNG is definitely out there. You just have to outbid everyone else for it. The liquefaction plants are tied to long term supply contracts for their bread and butter. But they make the big money from the spot cargoes they sell due to the plants having more than their contract capacity. So, the gas is out there. Highest bidder gets it.

EU consumption was over 400bcm/year in 2021, which on its own is double the spot market of around 200bcm, obviously that will be less now but then you add on 80bcm for the UK (half of which needs to be imported). Set against that, EDF are still forecasting a shortfall of electricity in France which will need to be made up somehow.

It seems fanciful to suppose that Russia will be telling China that some of their LNG is being redirected to Europe, no matter what the price. And if the marginal therm comes from spot LNG that you've outbid Japan and China for in a La Nina winter that Japan is forecasting to be on the chilly side - then that doesn't sound like a cheap therm....?

[odysseus2000]

The LNG is definitely out there. You just have to outbid everyone else for it. The liquefaction plants are tied to long term supply contracts for their bread and butter. But they make the big money from the spot cargoes they sell due to the plants having more than their contract capacity. So, the gas is out there. Highest bidder gets it.

EU consumption was over 400bcm/year in 2021, which on its own is double the spot market of around 200bcm, obviously that will be less now but then you add on 80bcm for the UK (half of which needs to be imported). Set against that, EDF are still forecasting a shortfall of electricity in France which will need to be made up somehow.

It seems fanciful to suppose that Russia will be telling China that some of their LNG is being redirected to Europe, no matter what the price. And if the marginal therm comes from spot LNG that you've outbid Japan and China for in a La Nina winter that Japan is forecasting to be on the chilly side - then that doesn't sound like a cheap therm....?

Electrical power shortages could be reduced if storage was introduced, either batteries or compressed gas systems that now look cost effective and offer the currently missing link between intermittent renewables and demand.

As things currently look to me we are rapidly reaching the point where the steam generators of the 20th century are obsolete and can and need to be replaced by free fuel renewable and storage.

There is a large and vocal group of folk who are strong supporters of fossil and nuclear, but neither technologies make any sense to me given the developments in renewables and storage.

Regards,

[Hallucigenia]

The IEA have done a good overview of how things look for European gas in 2023 - they reckon we could be looking at a shortfall of 30bcm, assuming China's Covid problems abate then they will absorb most of the 20bcm of new LNG supply.

https://www.iea.org/reports/never-too-e ... ext-winter
The IEA will present a roadmap for securing Europe's gas balance for next winter showing what is needed to ensure storage sites are filled to 95% capacity by the beginning of the 2023-2024 heating season and to structurally reduce gas consumption during the winter. Key measures include:

Speeding up investments in energy efficiency improvements.
Faster deployment of renewables.
Accelerated installation of heat pumps.
Identifying remaining fuel-switching options in industry and the power sector.
Behavioural changes.

And a good overview of LNG from ICIS :
https://www.linkedin.com/feed/update/ur ... 293148160/

[odysseus2000]

It would be nice if a competition was run with big prizes for who in 12 months could make the best renewable generator & storage system. The contestants would have to register & then after a brief review say 12 would be given say £100 million each & have a year to make both the generator & storage system that could then be reviewed by say Royal Society & the best 3 given patents for 10 years to encourage investors to pony up for large facilities.

As things are many of the promising technologies are short of cash & busy lobbying government for funds rather than building stuff.

Regards,

[TUK020]

It would be nice if a competition was run with big prizes for who in 12 months could make the best renewable generator & storage system. The contestants would have to register & then after a brief review say 12 would be given say £100 million each & have a year to make both the generator & storage system that could then be reviewed by say Royal Society & the best 3 given patents for 10 years to encourage investors to pony up for large facilities.

As things are many of the promising technologies are short of cash & busy lobbying government for funds rather than building stuff.

Regards,

Take a look at some of the Engineering with Rosie YouTube clips.
Example: https://www.youtube.com/watch?v=Ze-zaW3au9Q
You will be amazed at how "new technologies" are actually retreads of old ideas that weren't as good as they were hyped to be.
Very good on the subject of vertical axis turbines, and scalability of turbines

[odysseus2000]

It would be nice if a competition was run with big prizes for who in 12 months could make the best renewable generator & storage system. The contestants would have to register & then after a brief review say 12 would be given say £100 million each & have a year to make both the generator & storage system that could then be reviewed by say Royal Society & the best 3 given patents for 10 years to encourage investors to pony up for large facilities.

As things are many of the promising technologies are short of cash & busy lobbying government for funds rather than building stuff.

Regards,

Take a look at some of the Engineering with Rosie YouTube clips.
Example: https://www.youtube.com/watch?v=Ze-zaW3au9Q
You will be amazed at how "new technologies" are actually retreads of old ideas that weren't as good as they were hyped to be.
Very good on the subject of vertical axis turbines, and scalability of turbines

Rosie is just regurgitating what has been done & is not focused on storage which is a very important & missing consideration.

The beauty of competitions is that new ideas can be tried out & combinations of generation plus storage considered.

Regards,