Market price for gas 43 per cent lower than last year

Gas bought for prompt delivery on the UK’s wholesale market over July cost 43 per cent less than the average price paid over July last year, despite rising demand from combined cycle gas turbines (CCGTs) for power generation.

Price reporting agency Platts said the average price of near-term gas was 43 per cent lower year-on-year in July, having fallen 5% from the average price in June, due to low demand for gas storage injection following a mild winter.

Platts energy analyst Alex Froley said demand for gas could have been even lower had it not been for gas-fired generators increasing their demand.

“The decline in demand would have been even greater… if not for an increase in natural gas use by power generators, who took advantage of lower gas prices and switched away from coal,” said Alex Froley, Platts energy analyst.

Last year coal-fired power typically dominated the fuel mix at around 40 per cent while gas-fired power would often contribute less than 20 per cent. However, the steady decline in gas prices has meant the fuel is now able to compete with perennially cheap coal sources.

“Bearish UK spot gas prices helped strengthen natural gas’ position as the dominant energy source in the UK, which accounted for more than 40% of the country’s energy mix in July,” added Platts’ associate editorial director of power Henry Edwardes-Evans.

Prices in the UK power market continued their decline for a seventh consecutive month in July, falling 5% month over month for prompt-delivered power and down 27% year over year to hit a new four-year low of £34/MWh on July 17.

The losses came despite ongoing maintenance at nuclear, coal and CCGT plants as higher output from wind, biomass and solar generation helped to offset potentially tighter supply margins.