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28 | 16th - 22nd January 2015 | utILIty WEEK Markets & Trading Tricks of the trade Jillian Ambrose So who is the big winner from the recent Brent crude oil price crash? The surprise victor may turn out to be none other than Labour leader Ed Miliband. His distinctly anti-market threat made 18 months ago to freeze retail energy prices if elected made sense (politi- cally, if not economically) amid concern over rising wholesale prices. But it carries a lot less weight with the electorate when prices begin to slide. Luckily for him the collapse be forced to untangle the cost of liquefied natural gas deliveries and pipeline supply, hub-based and oil-indexed contracts, and complex forward market hedging. It takes water regulator Ofwat more than a year to regulate water prices, and that's for a market where it is far simpler to work out what costs what than energy. To threaten energy cuts in three months is not reform – it's electioneering at its most cynical. of the global oil price has driven the UK's gas and power markets to historic lows, offering a far more politically appetising option: the only thing better than threatening to freeze rising energy bills is to cut bills which just refuse to fall. Analysts have unanimously pointed out that forward hedg- ing positions have not yet had enough time to unwind. But Miliband's plan is to give Ofgem powers to force a cut before the 7 May election. But how much of a cut would be fair for Ofgem to impose? Determining the exact costs faced by energy companies is no easy task. The regulator would This week Wholesale power price at four-year low Market price of uK electricity expected to fall further as gas glut keeps markets under pressure The market price of UK electric- ity slumped to a four-year low in January and is expected to fall further over the course of 2015 as ample gas supplies keep energy markets under bearish pressure. Market price experts at Icis said its Icis Power Index (IPI) fell 11 per cent from the end of 2013 to the end of 2014, with January seeing the lowest value in four years, at £44.627/MWh. Electricity prices take direction from gas wholesale markets, which over the past year have trended lower despite concern over Russian gas supply through Ukraine as tensions between the two countries escalated. A glut of available supply and relatively mild winter temperatures this year and last mean bearish fundamen- tals are expected to continue, and dramatic losses on the Brent crude market will also weigh on gas pricing levels. On Monday 12 January, Brent crude prices fell below $49 per barrel, from $110.46/bbl last summer. "Electricity prices have lost a lot of value in 2014, and many of the same factors that depressed values last year, in particular the oversupply of gas and more renewable energy, are still in place for 2015," said Zoe Double, head of power at Icis. "This means that the part of the house- hold electricity bill made up of energy costs is falling, and wholesale energy prices could fall further." Analysts expect the lower wholesale price to cut costs for utilities by the end of Q1. Labour leader Ed Miliband said his party is set to bring a vote to Parliament seeking a fast-track law to enable Ofgem to force the cuts. JA EnErgy Renewables boosted low-carbon power Low-carbon power climbed to 38.6 per cent of the genera- tion mix in the third quarter of 2014, due to the rising output of renewable energy, according to government data. The latest statistics from the Department of Energy and Cli- mate Change show that despite heavy output losses from the UK's nuclear fleet, the increase in renewable energy from wind, solar and bioenergy sources bolstered low-carbon output. A string of unplanned outages and safety concerns at EDF Ener- gy's nuclear plants saw nuclear output in Q3 2014 fall 16 per cent from the same quarter in 2013, to just 20.8 per cent of the mix. The losses were offset by a 24 per cent rise in generation by renewables, with bioenergy up 31 per cent, the government said. In addition, gas-fired power generation usurped coal-burn as the dominant fossil fuel within the energy mix, due to histori- cally low gas costs. Gas generation accounted for its highest Q3 generation share for the past three years, at 38.6 per cent, while coal-fired power was lower at 20.1 per cent. Prior to the publication of the data, Zoe Double, head of power at Icis, told Utility Week that "the lower cost of gas relative to power led to a higher return for [gas-fired power] volumes, allowing greater use of gas-fired power in the energy mix". "For the first time in years, generators opted to switch from cheap coal-fired power to gas generation over the summer," she added. EMIssIons Carbon market value grows to €45bn The value of the global carbon market grew 15 per cent over 2014 to reach €45 billion as the European Union's Emissions Trading System (ETS) began to show signs of a price recovery. Analysts at Thomson Reuters Point Carbon said the value of the global market increased despite traded volumes shrink- ing by 17 per cent due to higher prices on the EU ETS as well as in the North American markets. The ETS bucked a four-year downtrend last year to post the first gains seen since 2010 following policy decisions taken in Brussels to reduce supply by "backloading" the entry of new allowances into the market. By reducing the glut of sup- ply within the market, prices were able to rise, breaking through the €7.40/tonne mark, but it also led to a 13 per cent reduction in number of transac- tions, according to Point Carbon. The analysts predict that 2015 will see the value increase by half, to €69.5 billion. Under pressure: prices expected to fall further "Ed Miliband could be a winner from the oil slump"