Summary of UK Gas and Power Fundamentals

• Bearish sentiment continues across UK gas and power markets.
• Weak demand fundamentals despite some cold / below normal temps forecast for next week.
• High wind forecast in the UK also adding weight to sentiment.
• Yesterday wind generation contributed 30% to total supply.
• NBP April gas trading down 1.5% yesterday.
• UK gas NTS system is still “oversupplied” despite issues at the Sleipner field curtailing Norwegian flows into Teeside.
• Total NBP supply is nominated at c.260mcm : UKCS 98MCM, NCS 80MCM and LNG 70MCM.
• On the supply side a key driver has been the near record levels of LNG gas imports into the UK.

New Stream Current View

Bearish sentiment and fundamentals remain. New Stream seeing this a potential buying opportunity for clients looking to fix %’s of annual volumes ahead.

In terms of PPA and power sales we advocate fixes rather than “wait and see” to protect against downside in a market trending lower.

Consultation on further technical amendments to Capacity Market

BEIS have issued a new consultation on further amendments to the CM. 

The key points are around proposed changes for the T-3. 

The T-3 auction will be run in parallel with, and to the same standard timeframe regarding pre-qualification, appeals etc, as the normal T-4 auction. Participants in the T-3 auction will be required to pre-qualify again rather than using their existing pre-qualification for the T-4 that should have happened last month. This will also mean that some participants are likely to have to go through pre-qualification for 3 auctions almost simultaneously - the T-3 for 2022/23, the T-1 and the T-4 for 2023/24. 

As with the T-1 auction to be held this summer, participants are not required to post Bid Bonds until State Aid is reinstated. Participants will have 40 days from the "capacity payment trigger event" to lodge the Bid Bonds. 

BEIS also propose the following changes to milestones:

• The Financial Completion Milestone to be brought forward from 16 months to 12 months after the Auction Results Date.
• The requirement to post additional Bid Bonds should the FCM not be achieved to be brought forward from 12 months to 9 months after the Auction Results Date.
• Deadline for metering assessments for existing CMUs to be delayed from 3 years to 2 years before the start of the delivery year. 

The consultation closes on 4th April. 

If you would like further information on this please contact Paul Sanders  [email protected]

Summer / Winter Gas Storage Arbitrage

• Gas storage inventories across Europe are on track to end March at about 27 BCM which is triple last year’s levels.
• This has meant that buying gas in the summer to sell during winter is the most profitable it’s been for eight years.
• However, low availability of storage capacity will make this difficult….
• The situation has been compounded by record levels of LNG coming to market.