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Market Wisdom

UK Gas Prices Slump Due to Low Demand and Strong Wind Power Output

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Renewables are now powering a third of the UK’s electricity demand, with provisional government figures stating that wind power accounted for 17.1% of the country’s electricity supply last year. This is a record high, compared to just 14.8% in 2017.

While a step in the right direction towards a renewables-powered economy, gas prices are taking a toll. A recent report by Reuters owed mixed gas prices to weaker wind output forecasts and an oversupplied system. National Grid data showed a 158.6 mcm (million cubic meters) daily gas supply, compared to a demand forecast of 132.5 mcm.

This resulted in the British gas system being oversupplied with 26.1 mcm of gas.

A Record Year for Wind Power

Windpower Monthly reported that in 2018, the grid saw an addition of 700MW (megawatts) of onshore wind capacity, bringing the onshore total to 13.5GW (gigawatts) and the offshore total to 8.2GW, thanks to a 1.2GW addition being brought online.

Falls in nuclear, coal and gas power output were offset by a boost in renewables production, with the total electricity generation for 2018 going down 1.4% to a total of 334TWh. Wind, solar and bioenergy were the primary renewables to owe for this shift.

The Department for Business, Energy and Industrial Strategy stated that renewables collectively accounted for 111.1TWh (33.3%) of energy production in 2018, up from 29.7% in 2017. This was partly due to several offshore expansions and new wind sites being brought online.

For instance, the world’s largest operational offshore project, Walney Extension, accounted for 659MW of electricity production.

Subsequent Gas Price Slumps

In the gas industry, the September contract went down to 29.9 pence per therm, falling by 0.59 pence. Traders claimed that the day-ahead rise of 0.45 pence was due to a correction in the previous week’s low price levels. Additionally, Tuesday’s expected decline in wind power output was purported to raise demand for gas power.

While this may be mixed news for traders, businesses can now benefit from these dropping gas prices. With around 80% of British businesses overpaying for gas, now is a good time to compare prices and find a more affordable supplier. Utility Bidder provides businesses with commercial gas deals and supplier comparisons across the most reliable companies.

The Future of Renewables in the UK

Record-breaking figures can be seen across the board for renewables production, demonstrating its unstoppable momentum. While solar PV load factors dropped in Q4 of 2018, hydro, bioenergy, onshore and offshore wind production skyrocketed.

Deputy chief executive of Renewable UK; Emma Pinchbeck, told Windpower Monthly that flexible power, fair markets, cheap generation and innovation funding are compelling enough reasons to push the government to recognise the position of renewables in the future of the UK’s power production.

With renewables becoming an increasingly prominent component of power generation in the UK, it’s no surprise that traditional energy producers are taking a hit. Only time will tell how this will affect the economy as a whole. For now, businesses can benefit from cheap gas while it lasts.