Wholesale energy costs fall as French nuclear boost eases fears

Hungarian foreign minister defends use of Russian gas and oil

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An increase in energy supplies in continental Europe has eased pressures on the UK’s energy market, as the price of wholesale gas and electricity falls. While much of northern Europe has been reeling from the icy weather over the past week, an increase in nuclear output from France’s power stations, combined with the hydroelectric power generated from southern Europe has eased pressures on electricity supplies. While Russia’s manipulation of European gas supplies has played a major role in driving up the energy bills over the past year, a major drop in nuclear output from France made matters worse, causing an increase in the price of energy.

Over the past year, about half of France’s nuclear reactors have been troubled by shutdowns due to maintenance and repair work caused by significant corrosion safety problems as cracks were detected in the cooling circuits of some nuclear reactors.

Speaking to Express.co.uk, experts previously warned that in many of these reactors, cracks in cooling systems could cause devastating accidents, comparing them to Fukushima. 

But as nuclear output in France has increased, the day-ahead price for natural gas deliveries in the UK fell by 4 percent to 332p per therm, while month-ahead prices have dropped by 5.6 percent to 322p per therm. 

These reactors have ramped up production over the past few days and are expected to increase through the week as four more nuclear reactors come back online.

The price of electricity faced a more dramatic drop in the European power markets, falling from a record £675 a megawatt-hour earlier this to a low of £353. Meanwhile, in France, power prices fell by 5 percent while in Germany they fell by 7 percent.

The cold snap that has hit the UK over the past week has sent electricity prices to record highs, particularly as the country has been hit by cold, dry days, with very slow winds that have resulted in wind energy generation plummeting. 

These low wind speeds had a huge impact on wholesale electricity prices, with energy and commodities expert Javier Blas tweeting on Sunday: “UK wholesale day-ahead electricity prices surge to a **record high** as cold, dry and calm weather cripples wind production and sends demand soaring.

“On the EPEX platform, UK baseload for Monday clears at £674 per MWh, while the evening peak load clears >£2,000 per MWh.

“The situation should start to improve from Monday evening as weather models forecast more wind, which should ease the tightness in the UK (and also in continental Europe). But demand will remain high due to below seasonal normal temperatures.”

As temperatures plummetted, households began turning up their heating to stay warm, which increased demand and even led to the National Grid putting emergency power units at Drax in north Yorkshire on standby on Monday over fears of a blackout. 

Russia’s invasion of Ukraine threw European energy security in chaos, as Russian President Vladimir Putin began squeezing supplies of gas to the EU in response to Western sanctions. 

While the UK did not import much gas from Russia, it was deeply affected by these events, as the loss of Russian gas led to a spike in natural gas prices on the international markets. 

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Analysts at investment bank RBC told the Guardian: “Despite this grim scenario for the week, we could see that the electricity system is coping relatively well with the situation, albeit power prices suffered a significant increase.

“Despite the increase in gas demand on cold weather and low wind resource, we could see how gas storage levels are doing better even this week on any single day versus the same day last year.”

Fears of a shortage of gas and electricity supplies have led the National Grid to it may have to impose three-hour planned blackouts if it fails to acquire enough gas this winter. 

In order to prevent this nightmare scenario, the National Grid has rolled out a demand flexibility service, which will pay households to avoid using energy at certain hours of the day. 

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