Natural gas prices predicted to stay competitive for the UK’s buyers over the next year and beyond


Natural gas prices predicted to stay competitive for the UK’s buyers over the next year and beyond

June 10, 2020

The UK’s gas buyers could see the wholesale NBP price stay low well into 2021 due to a mild winter and the Covid-19 crisis, Hartree predicts based on data analysis of the energy market

In both Europe and Asia, the winter temperatures for 2019 – 2020 were mild, leaving excess gas in the global liquefied natural gas market (LNG). This LNG glut found its way into Europe, displacing European storage withdrawals and leaving end-of-winter European storage at an all-time high.

Chart showing EU Gas Storage rates in 2020
At the start of the Covid-19 pandemic, North-Western European stocks were twice as full relative to the five-year average

Unsurprisingly, Covid-19 took the natural gas market into unchartered territory, progressively destroying demand in countries in lockdown for at least two months driving prices to new lows.

Chart showing UK Gas price during 2020 and COVID-19
The UK Gas spot price hits single digits as demand fails to materialise.

Natural gas prices in Asia

China was first to falter, with demand falling almost 40% from 9.6 bcf/d in January pre- lockdown, to just over 5.9 bcf/d for nearly 8 weeks. This crushed the LNG price in Asia from $5.3/mmbtu in early January, to a low of $1.9 mid-April – additionally pressured by other Asian LNG buyers going through their own Covid-19 crisis.

Changes in European natural gas prices

Ultimately, much of the excess LNG was pushed to Europe, which is both a large demand centre and has large storage capacity. But even Europe has its storage limits and with high stocks coming out of winter, we expect European storage to hit full capacity in August.

LNG producers have responded with cuts in production from major suppliers, the USA, Russia and Norway. France has forecast much reduced nuclear production for the balance of the year, implying more gas-fired power will be needed to fill this gap, but even so, we forecast prices to remain under pressure and continued single-digit NBP prices in Q3.

With European storage expected to be full as we go into winter and producers likely to start producing just as soon as the market can pay their variable costs (thus putting a cap on any market rallies), we don’t predict the market cleaning up until well into next year, possibly the winter of 20/21.

In the end, of course, the world will find a demand for cheap natural gas. But for the next twelve months, at least, there should be a lot of competition for UK gas buyers.

written by
Paul Garske

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AGP Sustainable Real Assets Pte Ltd (AGP) and Hartree Partners, LP (Hartree) today announce the launch of AMPYR Energy USA, the second joint venture between the two organizations in just over a year.

AMPYR Energy USA will be headquartered in New York and is targeting to build a 5GW utility-scale solar PV platform across multiple US markets. With experienced renewables development professionals on the ground, the newly-created company will continue to leverage AGP’s experience in developing large-scale renewable power projects globally, and Hartree’s cutting-edge power trading analytics and zero-carbon solutions.

“With the Federal and State goals for accelerating the energy transition, the US will be one of the fastest growing solar markets in the world and a core strategic priority in realizing AMPYR’s ambition of becoming one of the largest independent renewables developer and operator globally,” said Saurabh Beniwal, Partner at AGP and Board Chair for AMPYR USA.

Since its inception in February 2021, Hartree and AGP’s European solar venture, AMPYR Solar Europe (ASE), is making swift progress towards its goal of rolling out 5GW of large-scale solar projects to establish itself as one of the largest utility scale solar platforms in Europe. ASE also recently closed a €400 million facility to support this plan.

Following in the footsteps of ASE, expectations are equally high for AMPYR USA.

“We are excited to take another step forward with AGP into the US market,” said Stephen Semlitz, Managing Director of Hartree. “This new venture allows us to further demonstrate our decades of experience in finding investment solutions, consulting, and generating sustainable and commercially viable strategies for energy renewal and regeneration.”

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AMPYR Solar Europe (ASE), a pan-European solar developer, and Edinburgh Airport Limited today announce the signing of a deal to develop a new solar farm linked with battery technology and electric vehicle charging infrastructure at Scotland’s busiest airport.

Under the agreement, ASE along with its local construction partner, Absolute Solar & Wind will build approximately 9MW of solar PV, 1.5MW of battery storage and 40 EV charging points. The large ground-mounted solar PV system and battery will be situated next to the runway on a 16-acre plot of land, connected to the airport via a high voltage private wire network.

The development will be a cornerstone of Edinburgh Airport’s goal to achieve Net-Zero by 2040 by generating clean, renewable energy that will cover about 30% of the airport’s total consumption.

“Our commitment to a net zero future is underpinned by the various strands of work we have going on across the airport as part of our Greater Good sustainability strategy and one of the most visible projects will be this solar farm,” said Gordon Dewar, Edinburgh Airport’s Chief Executive. “We are happy to confirm our partners in this exciting step and our collaboration will enable us to implement this technology and allow us and Scotland to benefit from it as soon as possible.”

The project is in the late stage of design, with construction planned to start this summer and be fully operational by the start of next year.

“We are really pleased to be partnering with Edinburgh Airport on this important step towards a net-zero future and in support of its impressive “Greater Good” sustainability strategy,” said Andrew Gould, Executive Chairman of ASE. “Edinburgh Airport’s leadership shows a way forward to zero carbon for the airport sector. This is the first of ASE’s five renewable energy projects in Scotland to reach the delivery stage: the commitment and support of the Scottish Government and its strong policy position on climate change is clearly attractive to international investment.”

Edinburgh Airport will purchase the power produced by the solar farm through a long-term Power Purchase Agreement with ASE. This PPA will generate long-term energy and carbon savings for the airport.

“We are delighted to support Edinburgh Airport with its ongoing drive to reduce its carbon impact,” said Matthew van Staden, Senior PPA Originator at Hartree Partners. “Through our expertise within Hartree and AMPYR Solar Europe, we can drive and deliver innovative energy solutions for companies within energy-intensive sectors. Our understanding of sustainable generation and commercially viable strategies in this space helped bring this project to life for Edinburgh Airport.”

The construction is further supported by the Scottish Government’s Low Carbon Infrastructure Transition Programme, which have provided a grant for a portion of the capital expenditure.

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