Price of gas and power falls in UK as continental energy eases supply pressures

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Gas and power prices have fallen in signs that the strain on the UK and Europe’s energy supplies is easing despite the icy weather.

A marked increase in nuclear output from power stations in France and hydroelectric power in southern Europe has lifted pressure on electricity supplies across northern Europe.

The UK price for gas for delivery tomorrow fell 1.1% at 342p per therm on Wednesday, while month-ahead prices were down 3% at 331p per therm.

The price of power, which reached a record ?675 a megawatt-hour on the Epex Spot SE exchange earlier this week, fell to ?353 in a volatile market. Power prices for delivery tomorrow fell nearly 7% in Germany and about 5% in France.

Power prices had surged as the freezing weather forced Britons to increase their heating use, pushing up demand for energy despite high bills.

The cold weather combined with a period of low wind, reducing the production of Britain’s windfarms to close to zero. Emergency power units at Drax in north Yorkshire were put on standby on Monday but not ultimately used.

Live data from the National Grid’s Electricity System Operator (ESO) on Wednesday showed wind accounting for 20% of electricity generation, behind gas with 48% and ahead of nuclear at 13%.

Separately, French nuclear output has ramped up in recent days and is expected to improve through the week as four more nuclear reactors, which were out of action for maintenance, are due to return.

There have been concerns over power shortages this winter in the UK and Europe amid the fallout from Russia’s invasion of Ukraine. However, the improving weather and resilience of the system so far has brought some encouragement.

Analysts at investment bank RBC said: “Despite this grim scenario for the week, we could see that the electricity system is coping relatively well with the situation, albeit power prices suffered a significant increase.

“Despite the increase in gas demand on cold weather and low wind resource, we could see how gas storage levels are doing better even this week on any single day versus the same day last year.”

The rise in prices will have increased the cost of the government’s energy price guarantee scheme, which aims to cushion the blow of rising wholesale costs.

The energy regulator Ofgem is pushing for a cap on how much power stations can charge National Grid for backup electricity. Ofgem wants to tighten rules to prevent “excessive” profits and intends to publish proposals early next year, the Telegraph reported.

On Monday, the National Grid tested its “demand flexibility service”, which incentivises consumers and businesses to reduce their power use. The electricity system operator said on Wednesday thattest events had delivered over 780 megawatt hours of demand reduction, and ?2.8m in savings since the scheme was launched last month. More than 1 million households and businesses have signed up to participate, it said.