Electricity prices in Britain have reached an all-time high, with gas also hitting a record three years ahead of sub-zero temperatures forecast for much of the UK next week.
Energy prices have jumped as markets brace for freezing temperatures that are expected to boost demand for heat and electricity.
The UK electricity market price hit a new record high of nearly £ 1,500 per megawatt hour for Wednesday night’s peak demand after a series of power plant outages and low levels of renewable energy production.
The price of gas in the UK for next month jumped a fifth to 80 pence per therm, its highest in nearly three years, ahead of the cold snap that could keep temperatures low across Europe until ‘early next month.
Higher energy market prices usually result in higher energy bills. Millions of households already face the risk of rising tariffs as the energy regulator warned it could raise the cap on standard variable tariffs from April this year to help energy companies cover the cost unpaid bills during the coronavirus crisis.
Tim Dixon, an energy market expert at Cornwall Insight, said cold weather has been a major factor in the growing demand for gas in the UK this year, which is 40% higher than the same time period. last year.
“This is driven by increased demand for heating, but also by high demand from gas-fired power plants, a consequence of low wind power generation and greater demand for electricity,” he said. .
The UK’s growing dependence on fossil fuels has been made more costly by a global boom in gas markets that has pushed up the price of imported gas in North Asia – on giant super-refrigerated tankers in the form of liquefied natural gas (LNG) – at a record high of $ 20,705 per million British thermal units last week.
James Huckstepp, gas analyst at S&P Global Platts, said the high prices offered by Asian gas buyers have diverted LNG shipments east and forced European energy companies to rely on stored gas stocks.
“If temperatures below normal continue in February and March, the United Kingdom, which has more limited storage stocks [will be] is particularly exposed to the tightening of the global LNG balance. Prices could easily go up 50% to entice a stronger Russian [gas] and compete with Asia for LNG, ”he said.
National Grid’s electricity grid operator (ESO) has relied heavily on gas and coal-fired power plants in recent weeks to meet UK electricity demand.
The control room issued an official warning that its reserve of electricity reserves would be about 1,100 MW lower on Wednesday night, double the deficit from last week.
Adam Lewis, a partner at commodities trader Hartree Partners, said National Grid was already paying thousands of pounds to idle fossil fuel plants for every megawatt hour they generate to fill the void left by power plant failures .
“The more we operate power plants that typically have low operating hours, the more I think we are likely to see such outages,” he said.
Lewis added that electricity market prices would remain “very sensitive” to any further blackouts, cutbacks in wind power or disruption of submarine cables connecting the UK to European power grids over the next week. .