We’ve noticed some steep fluctuations in prices over the last few days. This rise can be attributed to a number of factors and could mean that prices previously quoted and not locked in may not be possible to fulfil due to the volatility of the market currently where power prices have surged £3-5.5/MWh.
The market was expected to be turbulent following OPEC’s decision to cut oil production in order to stem the falling price a barrel of oil has seen over the last 18 months, however, this has been intensified by news that Switzerland’s largest nuclear plant will now be out of action for the next four months, pending tests. Further woes can be seen with news that Germany’s nuclear capacity will be decreased by 40% in Q1 2017 for refuelling. Finally, a colder UK winter forecast and rising coal prices, driven by Chinese demand, has meant that the market can expect an upward trend for prices over the coming quarter.
November/December UK power prices have all risen above £61/MWh, and the first quarter of 2017 above £63.50 – which is the highest seen for over seven years.
In addition to wholesale price rises, an announcement this week by Ofgem regarding a shortfall in Renewable Obligation (RO) recovery is affecting suppliers costs. Ofgem note that there is also administration costs to be recovered. Ofgem will publish a note on the extent of the 2016/17 RO administration costs in ‘due course’, in the meantime this uncertainty has fed through to suppliers pricing. More information can be found here: – https://www.ofgem.gov.uk/publications-and-updates/renewable-obligation-number-rocs-presented-towards-201516-uk-obligation