Energy outlook: what’s in store this winter?

Energy outlook: what’s in store this winter?

After so much turbulence, wouldn’t we all like to know what’s going to happen in the energy market. Will prices continue going up, or will they start to fall?

If only we had the answers…

That said, our experts have been carefully studying the market and looking at the key drivers as well as the potential scenarios that could play out. You can now download this insight in our Winter 2021 Outlook report.

Clearly, there are a number of variables that will determine how the markets behave as we enter the traditionally more costly months of the year.

Keeping on eye on Russian gas

If you’ve been watching energy prices (and frankly, who hasn’t), you’ll no doubt be familiar with the controversary surrounding Nord Stream 2.

It’s hoped this new Russian gas pipeline will soon become operational and increase flows of much-needed gas into Europe. This should ease pressure on dwindling gas reserves across the Continent – and help calm prices.

However, as well as depending on piped flow from Russia and Norway, in the UK we also rely on imported Liquified Natural Gas (LNG) deliveries. As it seems unlikely that increased post-pandemic demand from Asia will diminish any time soon, this could create fiercer competition – and push LNG prices up.

Weather predictions

The weather is another major factor in how the market behaves. It is challenging enough to predict temperatures for two weeks’ time – and even harder for wind – let alone trying to determine how the weather will behave in the winter months ahead. But looking at long-term weather indicators can provide some clues.

For example, El Nino/La Nina climate influences are predicted to be more active this winter, increasing the potential for cold weather conditions to become more prevalent in the UK during autumn and early winter. This could then potentially shift to milder, more unsettled conditions, which could then mean a greater chance of stronger winds.

Greater dependence on wind

In the UK, we rely on gas for power generation, and have also turned to coal in recent months, especially with nuclear output being unreliable of late. But with wind power providing an increasing share of our overall power mix, if the wind doesn’t blow, this could increase volatility.

The Winter 2021 Outlook report also considers a range of other factors contributing to increased market volatility, including political influences and the rising value of carbon permits.

Evaluating price evolution

And to provide more context, the report also looks back to the summer, to explain the UK’s changing power mix, the reasons behind increasing power imports and to show how market prices evolved as we headed towards the sudden peaks we’ve experienced since September.

For more, information, you can download the Winter 2021 Outlook report here.

And if you need help to update or adapt your energy purchasing or management strategy in these challenging conditions, do speak to your Client Lead or Account Manager (existing customers) or email us via nBS@npower.com

 

Related Content