Utility Week

UTILITY Week 9th October 2015

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Page 25 of 29

Markets & Trading This week 'Suppliers should be forced to store gas' A legal obligation to store gas would drive investment in gas storage facilities in the UK U K gas suppliers should be legally obligated to hold a certain level of gas in storage facilities to help guard against a gas supply shortfall in winter, a former Conservative energy minister has warned. Charles Hendry told delegates at the Conservative party confer- ence last week that the govern- ment must intervene to help drive investment in gas storage and maintain the UK's security of supply. Current capacity is dwarfed by larger facilities on the continent, leaving the UK exposed. However, falling gas prices coupled with a low seasonal spread between sum- mer and winter gas prices mean that securing invest- ment for large storage projects has been slow. "I'm persuaded we need to put a legal obligation on the companies that supply gas that to keep a certain amount in storage. That will drive forward investment in the new facilities, which I think will be a central part of our security of supply," Hendry said. Also at the conservative conference, Energy and Utilities Alliance chief executive Mike Foster said he had raised the problem of gas storage investment with the previous coalition government. "The argument was that it should be le to the market and the market has not delivered so there has to be some form of intervention, whether it's a legal obligation or cap and floor assurance mechanism but there is a need for gas storage," he said. Hendry added: "We need to change some of our strat- egies. France has 100 days [storage capacity], Germany has 120 – we have 13 to 14 days." JA, MB ELECTRICITY APX exchange gains ground on N2EX Power market traders are increasingly opting to use the smaller of the UK's two exchange platforms to take part in the day-ahead power auction, according to government data. Although N2EX continues to hold double the exchange traded volume of its rival APX, the smaller of the two has been steadily gaining market share this year. Government data shows that in January of this year exchange traded volumes were split between N2EX with 42 per cent and APX with just 6 per cent of the total volumes traded the day before delivery. The remaining 52 per cent of electricity consumed was not traded via an exchange, the data shows. Within two months APX saw its share of the day-ahead market double to 12 per cent and continue to grow to reach 17 per cent of the market in June. By contrast, N2EX has seen its share shrink from 42 per cent to 35 per cent of consumption. APX commercial director Derek Abernethy told Utility Week: "The overall size of the UK day-ahead auction market has remained similar, [but] APX now has a larger share and we expect this trend to continue." The exchange has benefitted from N2EX's decision to pull out of intra-day trading activities in March 2014, but N2EX is poised to launch a new updated plat- form for intra-day trading later this year. ELECTRICITY UK to close all coal plants by 2023 Officials at Decc are planning to set 2023 as the date by which all coal-fired power plants must close, according to reports. Under the plans, the UK's ten remaining coal-fired power stations will be forced to convert to alternative fuels such as woodchips or fit carbon capture and storage equipment, or else shut down completely. The Times said it expected energy secretary Amber Rudd to announce the proposal ahead of the United Nations climate change conference in Paris in December. According to trade associa- tion Energy UK, coal plants gen- erated about 30 per cent of UK electricity last year, more than nuclear and renewables. A Decc spokesperson said: "While fossil fuels have a role to play in meeting our energy demands, coal as a percentage of total generation has fallen from 40 per cent in 2012 to 29 per cent in 2014. This reflects the fact that a number of coal power stations have closed in recent years and we expect this trend to continue. The UK is over-reliant on LNG 26 | 9TH - 15TH OCTOBER 2015 | UTILITY WEEK Gas prices slide but electricity firms up 65 60 55 50 45 40 35 FORWARD GAS AND ELECTRICITY PRICES, ICIS 01 Oct 2014 01 Nov 2014 01 Dec 2014 01 Jan 2015 01 Feb 2015 01 Mar 2015 01 Apr 2015 01 May 2015 01 Jun 2015 01 Jul 2015 01 Aug 2015 01 Sep 2015 UK gas prices fell to six-year lows in Q3 but electricity prices have started to resist the downward trend as concerns over the winter's generation capacity loom. Gas prices fell by over 11 per cent over the quarter, while power prices fell just over 3 per cent, market experts at Icis found. In theory, cheap gas and stronger power prices should boost generating profits for gas- fired power units. Icis power index value Icis UK gas calendar year-ahead (p/th) North Sea gas field outage with tighter supply surplus boosts prices UK's largest gas storage facility operator announced capacity limits Dutch government announces domestic gas production restrictions Lower oil prices in long-term contracts brings gas prices down Gas oversupply, low oil prices and warm temperatures depress prices Unusually cold weather boosts energy demand Source: Icis

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