2021 opened with a familiar theme.
Average power prices hit a multi year high in January.
In January 2021, they were €82.46 per mWh up 85% on the same period in 2020 and up 32% on December 2020.
- Specifically, the outturn in January arose for the following reasons:
- Gas prices increased by 36% mid month due to high demand arising from cold weather.
- Strong Asian demand for Liquefied Natural Gas (LNG) diverted gas supply away, resulting in fewer deliveries to Europe. In January, Britain only received 29% of January 2020 deliveries
- Wind generation contributed only 32% of the generation mix, meaning expensive gas contributed the majority of power requirements
- Unscheduled Outages remain at some key Combined Cycle Gas Turbine (CCGT) generation plants (e.g. Whitegate 400MW).
- Demand increased due colder weather.
Key indicators remain elevated
Pricing on the Single Electricity Market (SEM) are ticking up month on month since the Summer.
| Period | Date | Electricity (€/mWh) | Gas (p/th) Day Ahead | Coal ($/t) | Carbon (€/t) | Brent Crude ($/bl) | |
| Month End | 31-12-20 | 62.47 | 57.60 | 69.25 | 32.87 | 51.43 | |
| One week ago | 24-12-20 | 65.67 | 50.16 | 68.90 | 32.28 | 51.10 | |
| Four weeks ago | 27-11-20 | 69.90 | 41.02 | 60.55 | 28.39 | 47.96 | |
| Last Year | 02-01-20 | 25.72 | 31.00 | 56.85 | 24.59 | 66.33 | |
| Year on Year % Change | 143% | 85% | -5% | 34% | -23% | ||
Source: ICE-Intercontinental Exchange
Gas, Coal & Carbon
Day ahead Gas prices increased by 36% on December levels, due to:
- Below seasonal norm temperatures increased demand
- Reduced LNG supplies into Europe (29% to Britain v January 2020) as better pricing was achieved in Asia
Carbon prices remained strong boosted by speculative buying interest on foot of positive news on COVID-19 vaccine developments, providing a boon to economic growth.
What’s next?
Power markets will remain bullish in the 1st half of 2021.
Why?
- On going support for gas prices as gas storage levels in Europe are drawn down due to forecasted cold weather. Storage levels now below prior years.
- Continued outages in Irish and UK power stations together with strong demand will exacerbate price increases.
- Carbon prices are supported by increased commercial activity as COVID-19 inoculation gains pace across Europe.
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