UK Energy Market Update
January 2025
Market Summary
January 1st marked the end of the Gas Transit Agreement between Russia and Ukraine, meaning many European countries needed to source alternative supplies. Czechia and Austria have largely replaced their Russian volumes with imports from Germany. Hungary will continue to receive Russian gas via the TurkStream pipeline under the Black Sea, who are in turn supplying some of this gas to Slovakia. Transdniestria, a breakaway pro-Russian region of Moldova, was particularly hard hit by the cut off of Russian gas, suffering an energy crisis that led to blackouts and a heating shortage.
Russia accused Ukraine on trying to attack infrastructure on the TurkStream gas pipeline in the Krasnodar region, Russia’s last route for supplying gas to Europe. The pipeline is essential to the gas supply of several central European countries and news of an attack has raised concerns about critical infrastructure being damaged during the ongoing conflict. Russia claims damage was minor and did not impact operations. Ukraine declined to comment but dismissed this as ‘Russian propaganda’.
The United States Treasury imposed some of the toughest energy sanctions on Russia since the beginning of the Ukraine war. They sanctioned two major Russian oil producers, Gazprom Neft and Surgutneftegaz, along with 183 oil and LNG tankers known to be (at least partially) in the service of Russian producers. Russian LNG is not formally sanctioned by the EU currently so European gas hubs will be monitoring how individual countries react to these sanctions.
Low EU gas storage levels and how it will be refilled ahead of next winter was a major news point throughout January. Cold weather, low levels of renewables and the loss of Russian pipeline gas to Europe necessitated consistently high storage withdrawals through the month. EU aggregated storage ended the month around 54% full, around 16 percentage points lower than the same date last year and well below the 5-year moving average. With gas prices on the rise and with the summer 25 gas price higher than the winter 25 price, there is a disincentive in the market to buy more gas to fill storage ahead of next winter. Germany, which has the largest storage capacity in Europe by a fair margin, is looking into introducing a subsidy scheme to boost injections.
The UK government is in talks with the EU about linking their emissions trading schemes (ETS), a move the Labour government signalled early in its tenure. The main goal is to address potential challenges posed by the UK and EU's Carbon Border Adjustment Mechanisms (CBAMs). Aligning carbon prices would enable UK energy and goods producers to sell in European markets without needing to submit carbon permits.
Within hours of his inauguration, President Donald Trump issued sweeping orders to boost U.S. oil and gas production and roll back Biden-era climate policies. He declared a national energy emergency, easing environmental restrictions and fast-tracking energy infrastructure permits.
Trump withdrew the U.S. from the Paris Climate Agreement, lifted Biden’s 2024 LNG export pause, and resumed new project approvals. He also suspended federal offshore wind leasing, revoked EV sales targets, and announced plans for Arctic drilling and refilling the Strategic Petroleum Reserve.
These actions mark a sharp shift toward fossil fuel expansion, deregulation, and energy independence.
Net Zero News
In a historic milestone, solar energy has officially surpassed coal in the EU’s electricity mix for the first time. Last year, solar power accounted for 11% of the EU’s electricity generation, edging past coal’s 10%, according to Ember’s European Electricity Review. This achievement underscores the region’s accelerating shift toward renewable energy.
2024 was a record-breaking year for the UK’s heat pump sector, with sales surging by 63%. According to the Heat Pump Association (HPA), 98,469 hydronic heat pumps were sold, representing a significant milestone for clean heating technology.
Businesses need stronger support to transition to clean energy and improve efficiency or risk falling behind in growth and competitiveness, warns a new Energy UK review. Backed by major industry groups such as the CBI, UK Steel, Make UK, and the Food and Drink Federation, the report highlights key obstacles preventing businesses from decarbonizing.
He said it, and he meant it: “Drill, Baby, Drill!” is set to be the defining mantra of Donald Trump’s second term. In his inaugural speech, the President pledged to reshape the nation’s future by tapping into its underground oil and gas reserves. He also declared a national energy emergency.
Over the past decade, the UK has cut its reliance on fossil fuels for electricity in half while doubling its renewable energy share, making last year the cleanest on record. Carbon dioxide emissions from electricity have fallen by more than two-thirds, dropping from 419g per kWh in 2014 to 124g in 2024.
Renewable energy capacity surged by a record 530 GW in 2024, according to the International Renewable Energy Agency (IRENA). Global capacity has now reached 4,400 GW, up from 3,870 GW in 2023. While this growth surpasses last year’s record increase of 473 GW, experts warn it is still only half of what’s needed to tackle climate change.
The growth of renewable energy is steadily displacing gas-fired electricity in Britain, with gas generation in 2024 reaching its lowest level in two decades. A new report from Montel Analytics shows gas-fired output fell to 72.6TWh, down from 86.8TWh in 2023 and a sharp drop from 111.4TWh in 2022.
Since the Labour government took office, solar panel installations across England have risen by 10%, with nearly 75,000 systems installed in the second half of 2024. This marks an increase from 68,000 earlier in the year. Research from renewable energy accelerator iChoosr also highlights a 15% rise in overall clean energy adoption, including heat pumps and battery storage.
https://www.energylivenews.com/2025/01/31/england-sees-10-rise-in-solar-in-labours-first-six-months/
Electricity and Gas Prices
January was another volatile month for UK energy prices. Drivers of this were fluctuating demand, low renewables, supply concerns, colder weather and geopolitical uncertainty. While gas and electricity prices spiked due to the colder weather, they stabilized as forecasts changed and supply remained steady.
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 11.93 p/kWh (commodity). With the non-commodity added to this, the overall rate will be around 22.83 p/kWh+.
Carbon Prices
European Union Allowance (EUA) prices averaged EUR 78.56 per tonne in January, marking a 16.7% increase from the previous month. Prices followed a steady upward trend throughout the month, reaching a peak of EUR 83.96 per tonne on the final day—the highest level since 2024.
The surge was largely driven by a rebound in market demand, spurred by rising winter energy consumption and stricter emission regulations in the shipping sector. Additionally, a gradual reduction in carbon allowances across certain industries heightened supply concerns, further pushing prices higher.
Oil Market
2nd - Oil prices climbed on Thursday as investors kicked off the first trading day of the new year with optimism about China's economy and fuel demand, following President Xi Jinping's pledge to drive growth.
6th - Oil prices held steady, weighed down by a strong dollar, but remained at their highest levels since mid-October. Colder weather drove increased buying, while expectations of stricter sanctions on Iranian and Russian oil provided additional support.
9th - Oil prices saw little movement on Thursday as investors balanced strong winter fuel demand expectations with significant increases in fuel inventories in the U.S., the world’s largest oil consumer, along with broader macroeconomic concerns.
13th - Oil continued to climb for a third consecutive session on, with Brent crude surpassing $80 a barrel, its highest level in over four months. The rise was fuelled by broader U.S. sanctions on Russian oil and their anticipated impact on exports to major buyers India and China.
17th - Oil prices ticked higher, on track for a fourth straight week of gains, as new U.S. sanctions on Russian energy trade boosted expectations of potential oil supply disruptions.
22nd - Oil prices remained stable, as traders closely monitored President Donald Trump's proposed tariffs and the potential effects of the national energy emergency he declared on his first day in office.
27th - Oil prices inched higher, as traders remained cautious, despite the U.S. easing its initial sanctions threats against Colombia, which helped ease immediate concerns over potential oil supply disruptions.
31st - Oil prices held steady but were set for a weekly decline as markets awaited whether U.S. President Donald Trump would follow through on his threat to impose tariffs on Mexico and Canada.
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