Energy 2022- 2023: What's what

Our Industry and Trading Manager, Darren Williams reflects on recent market conditions and where we're heading throughout 2023.

While everyone was still dealing with the aftermath of the COVID pandemic, 2022 kick-started with soaring energy prices with rumblings of a Ukrainian invasion, in addition to increased energy demand, particularly in the UK. 

It is no breaking news that this has been a difficult year with the substantial rise in energy prices and the constant state of volatility has brought dramatic changes in the energy industry, suppliers, and people around the globe.

However, this winter has been unusual. The price of natural gas at the main hub of the continent has dropped to levels last seen before the crisis in Ukraine, while temperatures across Europe are breaking records.

Because the ‘heating season’ was delayed by an unusually mild autumn, gas storage facilities could be fully utilised. An unexpected turn in the middle of winter has been made possible by the current warmth, allowing them to be topped up once more (see chart). Overall, Europe has withdrawn from storage facilities half as much gas as it did at this point during the previous two winters. And the season should end mildly, according to projections.

A moderate October and November contributed to a decrease in demand, which released the pressure on the gas and electricity systems, allowing them to withstand a chilly December with less difficulty. In addition, despite the high temperatures, less demand has been seen than would typically be anticipated. As a result, worries about rolling blackouts and gas shortages have diminished. This is true not only here but here throughout all of Europe, and considering that this crisis is caused by a decrease in Russian supply to Europe, this is very vital. To make up for this, there has been an increase in LNG supply to the UK and Europe from all over the world, and decreasing demand has helped foster some stability.

Source: https://agsi.gie.eu/

This has led to stored gas across Europe being higher at this time of year than usual which will provide some resilience for the year ahead.

Defying gloomy predictions we begin 2023 with some hope as we have seen high renewable generation, including a record 84% zero-carbon generation on the 4th of Jan. This has further reduced the need for fossil fuels, and this should continue for the next couple of weeks at least and hopefully beyond.

However, it is still too yet to say that the energy crisis is over. Costs are still far above average. 

The cost of electricity as a whole has increased by about 50% since mid-2021. The current relief for Europe is due to the favourable climate. As the oil crisis subsides, the battle against climate change will only get more serious, so it is time that while we enjoy the good news we should seriously consider our Energy needs, reducing Energy and where our Energy is sourced from.