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Wholesale power market prices fell almost 11 per cent in May compared to the same month last year, despite the carbon tax doubling over the same period.
Whereas last year the average price of power bought in advance from the wholesale market was £50.07/MWh, the average price in May this year was just £44.67/MWh, according to the Icis Power Index.
The market experts’ findings follow months of steadily falling global commodities prices due to historic losses on the oil markets, which have now fed through to UK gas and power prices. And the data is likely to raise questions over whether UK energy suppliers should move to reduce retail prices.
Icis’ electricity editor Jamie Stewart told Utility Week the falls were particularly significant in light of the fact that the carbon price support tax is actually higher on the seasons trading in May of this year than it was on those trading in May of 2014.
In April this year the Treasury-mandated carbon tax climbed from £9.55 a tonne of carbon to £18.08 a tonne, saddling with UK generators with additional carbon payments in addition to the offset allowances required by the EU’s emissions trading system.
Stewart said the lower price of electricity has been prompted by weaker gas prices, which reduce costs for much of the UK’s gas-fired power generation fleet.
“The driver here is really the long, sustained drop in energy market prices that occurred from late November last year until February of this year. This was driven by a mild winter and comfortable gas inventories, as well as the delayed effect of the oil price crash which lasted throughout the second half of last year,” Stewart said.
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