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28 | 5TH - 11TH SEPTEMBER 2014 | UTILITY WEEK Markets & Trading This week Summer sees a more liquid power market Traded volumes on the UK power market were stronger year on year in August, according to Icis Traded volumes on the UK power market were stronger in August, with liquidity on later-dated contracts doubling year on year, according to data from market specialists at Icis. Last month the UK power market saw 24.4TWh of power traded for delivery this winter on the over-the counter market, compared with just 12.5TWh in August last year. Icis editor Jamie Stewart said volumes increased significantly from the typical summer lull seen last year principally due to market volatility as a result of the continuing unrest in key gas-transit state Ukraine. But he added that market participation from trading houses acting on behalf of smaller players is also increas- ing to partially fill the gap le following an exodus of financial players from Europe's energy markets last year. As consumers increasingly switch to smaller inde- pendent providers there has been a rise in the use of trading houses, which can access the market for provid- ers too small to participate directly. "I wouldn't say that these trading houses have plugged the gap le by the banks, but the market is in a better place," Stewart said. He added that on near-dated, or "prompt" delivery contracts, there has been an increase in liquidity for volumes traded through exchanges due to the increased regulatory and compliance requirement to do so. UK power exchange APX said August volumes on its "continuous market" were 13 per cent higher than in August 2013, while its auction volumes leapt 57 per cent to an all-time record of 1.05TWh. JA ELECTRICITY UK generation from fossil fuel slumps The amount of electricity gener- ated from fossil fuel sources in the first quarter of the year fell compared with the previ- ous year's Q1 output due to low demand and increased renew- able deployment, government data shows. The Department of Energy and Climate Change (Decc) released its latest energy statistics on 28 August, which show a sig- nificant decrease in the amount of coal-fired power used in the generation mix compared with the previous year, while gas-fired power burn fell to 16-year lows. Total electricity generated in Q1 2014 fell by 8.2 per cent, from 101.7TWh a year earlier to 93.3TWh, due to lower than aver- age demand as a result of mild temperatures through the winter. Coal-fired generation fell by 16.5 per cent from 41.5TWh to 34.7TWh, while gas-fired generation fell 19.5 per cent from 27.1TWh to 21.8TWh, "its lowest first quarter level for at least 16 years", Decc said. By contrast, wind and PV generation rose 59 per cent year on year from 7.1TWh to 11.3TWh, due to increased wind speeds as well as an increase in installed capacity, growing the share of renewables within the genera- tion mix from 12.4 per cent in the first quarter of 2013 to 19.4 per cent in the first quarter of 2014. Coal saw its share of the mix fall from 40.8 per cent to 37.1 per cent, while gas's share of generation fell from 26.6 per cent in the first quarter of 2013 to 23.4 per cent in the first quarter of 2014, Decc data showed. The share of nuclear genera- tion was relatively steady, slip- ping from 18.0 per cent in the first quarter of 2013 to 17.7 per cent in the first quarter of 2014, due to station outages. GAS UK gas imports fall due to mild weather Total UK gas imports fell 29 per cent in the first quarter of this year compared with the same time in 2013, according to data released by the government. The decrease in gas demand during an unusually mild winter stood in stark contrast to Q1 2013, when the UK experienced historically cold weather. Data from the Department of Energy and Climate Change (Decc) showed that import levels fell as gas demand dipped 19.6 per cent compared with Q1 2013. As a result, pipeline imports from Belgium fell 96 per cent compared with Q1 2013, when March temperatures hit near- record lows and record imports were seen on 21 March 2013. Deliveries of liquefied natural gas (LNG) were also around a fih lower, the data showed. On the up: smaller players' use of trading houses Tricks of the trade Jillian Ambrose "It turns out that gas is more expensive than it looks" If a news story is good, why stop running it? That seemed to be the approach taken at opposite ends of the UK national newspa- per spectrum over the past week. First, le-leaning, right-on Guardian readers were treated to news that the big six still have not reduced bills despite a summer of historic lows on the wholesale markets. The howls for price cuts were echoed just days later by the Daily Mail outrage-mongers. Surely it's not too complex to grasp that energy firms buy their supply in 2013 was more than 13 per cent higher than the pre- vailing prompt market rate at an eye-watering 75.60p/therm. Why? Well, the cost of gas isn't just the wholesale price. It includes costs relating to grid balancing, hedg- ing and seasonality. Of course the nationals aren't keen on the truth getting in the way of a front-page splash. But isn't it time for the big six to make their case? Until they do, they can't complain about the inevitable future bad press days. gas and power from the whole- sale market years in advance? This means that today's lightbulb is mostly powered based on mar- ket conditions at the beginning of last year: when the UK's domes- tic gas storage levels were empty, triggering a summer of aggressive demand (and prices to match) in order to replenish them. But on top of this it turns out that gas is more expensive than it looks. Energy compa- nies are required to publish their weighted average cost of gas (Wacog) in their segmental accounts each year, which sheds light on this. Early this year, for example, British Gas reported its Wacog for domestic customer