Tricks of the trade Jillian Ambrose

“Disruption of gas supplies would benefit some”

Long before there is any real sign that gas pipelines transiting Ukraine will run dry, analysts have been scrambling to assess the possible damage a supply disruption from Europe’ biggest supplier might bring. But perhaps the most interesting piece of analysis to have surfaced in recent weeks comes courtesy of Moody’s, offering a fresh take on the supply-shock scenario: not just of market and retail prices surging higher, but generator profit margins rising too.

A prolonged and ill-timed disruption to Russian supplies would send both wholesale and retail markets to dizzying heights. But although the price of UK power would follow the trend set by gas, it would then offer very attractive returns to those not reliant on gas as a fuel source.

Imagine avoiding the higher costs of gas, but still enjoying the higher market value of your generation. Imagine being Drax. Even utilities such as Centrica and SSE, which would take a hit because of their gas-fired power assets, would find these losses more than offset by the gains to be made through nuclear and renewable generation, Moody’s found.

It makes sense. The recent flurry of weaker than expected financial statements has shown just how damaging the impact of bearish market conditions can be to energy company earnings. In an inverse scenario of high demand, constrained supply and rising prices, it turns out the only ones who should be cowering in fear are the end-consumers. The likes of Drax, Centrica and SSE should be just fine.