UK Energy Market Update
December 2024
Market Summary
The first half of December brought colder than normal temperatures for much of Europe, although the UK experienced a very mild Christmas period. This resulted in Europe’s fastest rate of gas withdrawals for eight years, as stocks fell more than four times faster than the average over the last ten years. Europe’s aggregated gas storage ended the month at 72% full, around five percentage points lower than the 5-year average and significantly lower than the 86% on the same date last year. The EU Commission increased the storage refill targets for the bloc for 1st of February from 45% to 50%, adding further pressure to securing supplies to refill storage.
News surrounding the end of the gas transit agreement between Russia and Ukraine on 31st of December dominated headlines in the energy market throughout the month. It was confirmed by the EU Commission and the Prime Minister of Ukraine that no extension to agreement will be agreed. Ukraine is willing to continue transiting gas through their infrastructure to western Europe, but not Russian gas. Several European countries signed a declaration to support the preservation of gas transit through Ukraine. Slovakia, Austria, Moldova and Hungary are the countries that will be most affected by the stoppage of Russian gas via Ukraine. These countries are exploring options to secure alternative supplies. Slovakia signed a pilot gas import agreement with Azerbaijan, with the aim to develop a long-term energy partnership. Moldova is exploring alternate routes for Russian gas, namely through the TurkStream pipeline via Turkey and Bulgaria, the same pipeline Hungary still receives some Russian gas through. The EU Commission believes the end of this transit agreement will have a negligible impact on European prices. This assessment draws attention to the volume of LNG being produced globally, 500bcm, and compares it to the volume of Russian gas being lost, 14bcm, highlighting that the volume can be replaced with imports.
Russian President Vladimir Putin signed a new Decree (no. 1033) allowing foreign buyers of Russian gas to pay in Roubles via other Russian banks, not just the US-sanctioned Gazprombank, in order to circumvent US sanctions. The change will allow European buyers to continue to purchase Russian gas, whether that be LNG cargoes or flows through the Turkstream pipeline.
The Syrian Al-Assad regime, in power for over 60 years, was overthrown by rebel forces on the 8th of December. While this will not directly affect UK energy imports, markets will closely monitor the situation due to ongoing geopolitical instability in the Middle East.
Following the collapse of France’s government on 4th of December, there were concerns that this could have far-reaching consequences for Europe’s energy markets and send regional electricity costs soaring. France is by far the largest electricity exporter in Europe, accounting for roughly 60% of net electricity exports in 2024. The main concern surrounded the potential for less funding to be made available for EDF and that could impact French nuclear output. By month end, this had had a minimal impact on market prices.
The collapse of Germany’s governing coalition on the 6th of November risks delaying a draft law on waiving costly gas storage levy for foreign buyers. Germany's gas neutrality charge, used by Trading Hub Europe (THE) to manage gas storage, will rise by 20% starting in January.
Net Zero News
The global agreement to reduce plastic use has been delayed by a year due to a lack of consensus among nations. At the International Negotiating Committee (INC-5) talks in Busan, South Korea, over 200 countries met to draft a treaty to tackle plastic pollution but failed to reach an agreement.
Only 4% of energy professionals think the UK will achieve net zero by 2050, according to the Energy Institute's annual Energy Barometer report.
Global climate change currently risks driving 7.6% of species to extinction, with unchecked warming potentially threatening a third of all life on Earth. A study in the journal Science used historical extinction data to model how warming could impact animals, birds, and insects.
Energy companies worldwide have formed a new group to promote heat pumps and other clean technologies. The Mercury Consortium, led by the non-profit EPRI, aims to speed up the use of clean energy solutions like heat pumps, solar panels, and EV chargers.
According to Barclays Property Insights, a quarter of homeowners are focusing on energy efficiency upgrades. Popular improvements include loft insulation (48%), solar panels (33%), and double glazing (35%). Over half aim to reduce long-term energy use, while a fifth want to increase property value.
Ed Miliband is launching the Clean Power 2030 action plan. The plan aims to be the biggest energy reform in decades, focusing on securing Britain’s energy, protecting consumers from price spikes, creating jobs, and addressing climate change.
Analysts at Cornwall Insight say the Clean Power 2030 action plan leaves key questions unanswered.
Principal consultant Kate Mulvany highlighted unclear electricity market reforms as a major obstacle, putting low-carbon investment and the 2030 target at risk.
Reaching net zero requires collective effort, and small businesses play a key role. Their flexibility and innovation make them great drivers of sustainable change. With proper support, they can reduce emissions, save resources, and promote green practices in their communities.
Research by Hive Home shows that home solar panels save 2.8 million tonnes of CO2e annually, equal to taking 630,000 cars off the road.
Electricity and Gas Prices
December saw a bullish outcome, marked by a sharp increase in volatility. Key drivers included weather, concerns about European supply constraints, fluctuating renewable energy generation, and geopolitical events. While the month began with bearish trends, a quick rebound in gas and power prices from mid-December erased any earlier price declines.
Flexible Purchasing
EPEX Price
Some of our flexible purchasing customers are buying on EPEX, a European auction for power. Because they auction every hour of each day, customers get the “market average” price as opposed to a fixed-term contract over e.g. a 12-month period. Being on this product means that you will pay the average of each day for the month and once the market falls the price will follow.
The EPEX price finished the month with an average of 8.94 p/kWh (commodity). With the non-commodity added to this, the overall rate will be around 19.84 p/kWh+.
Carbon Prices
European Union Allowance (EUA) prices for December averaged €67.28 per tonne, a 0.36% drop from the previous month. Prices remained below €70 due to reduced power sector emissions, an oversupplied market, and reduced industrial demand amid Europe’s slowing economic growth. Higher auction volumes and uncertainty over policy changes also limited price increases.
Despite this, stable energy markets and policy support helped stabilize prices toward the month’s end. In January 2025, EUA prices are expected to range between €65 and €70 per tonne as winter energy demand balances against economic sluggishness.
Oil Market
2nd - Oil prices increased, driven by strong factory activity in China, and rising tensions in the Middle East, where Israel resumed attacks on Lebanon despite a ceasefire agreement.
6th - Oil prices fell as weak demand took centre stage, following OPEC+’s decision to delay planned supply increases and extend significant output cuts until the end of 2026.
10th - Oil prices dropped as worries about the impact of Syrian President Bashar al-Assad’s overthrow eased. However, the market gained support from China’s promise to increase policy stimulus, which could boost demand from the world’s top crude buyer.
13th - Oil prices edged up, heading for their first weekly increase since late November. This was driven by concerns over supply disruptions due to new sanctions on Iran and Russia, while a forecasted surplus continued to pressure the markets.
17th - Oil prices fell as China's economic data raised concerns about demand, while investors remained cautious ahead of the U.S. Federal Reserve's interest rate decision.
20th - Oil prices dropped due to concerns about demand growth in 2025, particularly in China, the world’s top crude importer. As a result, global oil benchmarks were set to end the week nearly 3% lower.
30th - Oil prices edged higher following reports that North Sea crude supply will decrease in February.
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