Abstract
Overview
Introduction
The growing role of wholesale traded energy markets across Europe creates a greater need for players throughout the value chain to be aware of the latest market movements and developments. From the wellhead or power station gate to the end-user, volatility in the spot and forward price of power and gas is creating an increasingly challenging environment for all market participants.
Scope
- An examination of the wholesale gas price trends in Europe' s three key markets - the UK NBP, the Zeebrugge Hub and the Dutch TTF.
- An assessment of traded power prices in the UK, Belgian, Dutch, German and French wholesale power markets.
- Insight and analysis into the impact of wholesale markets on the wholesale / retail price interface.
Report Highlights
The EU' s third package of energy reforms proposes limited opportunities for new investment
Infrastructure and storage positions are not a worry for either the UK or its European counterparts
Northwest European power markets continued to rally through Q3
Reasons to Purchase
- Establish the current level of wholesale and retail energy prices and the fundamental drivers behind movements in the traded value of gas and power
- Understand how wholesale pricing impacts different facets of the value chain, identifying the potential to limit risk through hedging strategies
- Forecast future developments in the traded price of gas and power in order to successfully take advantage of arbitrage opportunities
Table of Contents
- DATAMONITOR VIEW
- CATALYST
- SUMMARY
- ANALYSIS
- The EU' s third package of energy reforms proposes limited opportunities for new investment
- The EU' s third package of energy reforms proposes limited opportunities
for new investment
- Unresolved issues will be the key to achieving a successful single European energy market
- The majority of TSOs are affiliated to a vertically integrated utility
- Limits to network ownership have struck a raw chord with foreign investors
- UK gas transmission charges account for a small percentage of end user bills
- Cross-subsidization of network charges is a feature of European markets
- Domestic power prices illustrate a positive but weak relationship
- Large industrial prices for power customers are spread roughly around the sector average
- Localized distribution companies far outnumber national transmission regimes
- Localized distribution companies far outnumber national transmission regimes
- Infrastructure and storage positions are not a worry for either the UK
or its European counterparts
- Infrastructure and storage positions are not a worry for either the UK or its European counterparts
- Strategic European storage projects are not far behind the UK
- Pipeline investment will increase capacity this winter, confirms UK energy regulator Ofgem
- LNG projects are a priority in off-setting long-term concerns over security of supply
- Private investment in LNG is evident from the major European suppliers
- The Bacton-Zeebrugge interconnector acts as a bridge to European gas shippers
- Strong LNG injectability reduces the tightness in UK gas supply
- Total UK gas stocks are significantly higher than in 2006
- The demand side response has been positive as consumption falls
- Northwest European power markets continued to rally during Q3
- Belgian power prices illustrated sustained stability this autumn
- Short-term French baseload prices rose as month ahead contracts gained significantly over last month
- Near-end instability in the German market highlights NW European price interdependence
- Dutch power curves broke the NW Europe trend as prices fell
- UK power prices showed bullish form as prices continued to rise
- Gas prices rose as traders voiced concerns over winter 2007/08
- NBP gas prices took an upward turn at the end of Q3
- Near-end gas prices rose at the TTF with Brent crude indexation
- The spot price pushed upwards as oil speculation impacted upon wholesale gas trading
- APPENDIX
- This brief builds upon Datamonitor' s extensive pricing proposition
- Glossary
- This brief contains a number of industry standard terms
- Our analysis builds on other sources to provide greater insight
- Further Reading
- Extended Methodology
- We assess the profitability of fossil fuel plants across northwest Europe
- Our bespoke services can be tailored to your specific needs
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- List of Figures
- Figure 1: The independence of transmission systems
- Figure 2: Network charges typically account for a small portion of the household domestic bill (October 2007)
- Figure 3: Large industrial pricing and low network tariffs are the result of government subsidies to transmission operators (October 2007)
- Figure 5: The UK is anomalous to the indicative grid access and end user bill relationship (October 2007)
- Figure 5: Large power users benefit from lower network charges that feed through to lower end-user bills (October 2007)
- Figure 6: Germany counts the highest number of power distribution companies due to its regional nature
- Figure 7: European gas transmission and distribution numbers are stable, with the exception of Italy and Spain
- Figure 8: Most EU member states are preparing for the shortfall in indigenous gas supplies by investing in LNG
- Figure 9: Investment in adding capacity to LNG projects is at the forefront of energy companies' business plans
- Figure 10: Price signals and cross-border gas imports work in tandem to fulfill any shortfall in supply
- Figure 11: The UK' s regassification plants bring supply stability and reduce gas market uncertainty in the long-term
- Figure 12: Higher UK gas stocks alleviate the pressure as winter 2007/08 approaches
- Figure 13: A year-on-year comparison illustrates that mild and seasonally low temperatures can be reflected on the gas demand side
- Figure 14: Northwest European power markets continued to rally during Q3
- Figure 15: Belgian wholesale power prices firmed a touch on the near end of the curve as quarterly and annual prices continued to plateau
- Figure 16: Near-end prices gained on last month' s for quarter ahead and significantly more for month ahead
- Figure 17: The near-end of the German power curve characteristically followed the NW European market, as month ahead contracts rose sharply
- Figure 18: Dutch power prices continued to fall this month for Quarterly and Year-Ahead contracts, the Month-Ahead price rose
- Figure 19: The approach to winter 2007/08 has been illustrated by the UK' s power curves rising at both ends
- Figure 20: Gas prices rose as traders voiced concerns over winter 2007/08
- Figure 21: In line with seasonal expectations, gas prices in the UK upturned in the first months of Q4, most notably in the month ahead contract
- Figure 22: NW European gas producers experienced a sharp rise in prices due to current global oil uncertainties
- Figure 23: Belgian spot contracts took a sharp rise, diverging from fundamentals as a result of oil market indexation
- Figure 24: Energy pricing proposition
- Figure 25: Generation spread methodology
