Energy Buying Support for Independent Hoteliers
Energy market rates continue to rise at alarming rates. We advise hotels to review their current energy deals and clearly plan their management of this category over the coming year.
Recommendations
The volatility that has been observed over recent weeks is expected to continue as weather forecasts remain cold. As we progress into the latter parts of May, you would expect warmer weather to arrive. However, there is little confidence that this will happen as weather forecasts continue to remain unclear which is delaying the ability of shippers to inject into storage.
Carbon prices have continued push higher once again today following news that the UK government have announced steeper emissions targets for 2035. Now, a target is expected to be introduced to reduce 1990 emission levels by 78%, signifying an increase of 10% from the original. You would expect some drop off in prices as we progress throughout the summer, but currently due to the mass uncertainty with regards to how close we can stick to exit strategy for COVID-19 and constantly changing weather forecasts, prices are likely to hold onto their value and as a result it will not take much to launch prices higher. Therefore, it would be sensible to push through to secure contracts as soon as possible to mitigate any further risk through an increase in pricing.
Utility Trading Graphs
Electricity
Gas
Market Conditions / Price Drivers:
- A large surge was observed across both the gas and power markets throughout last month as cooler temperatures and the subsequent rise in demand more than challenged supply amid depleted gas storage stocks and sluggish LNG arrivals.
- Carbon prices continued to rally as tightening restrictions were accelerated forwards in their progression as the government continued to disincentive more carbon intensive sources of generation.
- Gas storage remains in a lower position when compared to the same point last year. Withdrawals have increased which is not usual at this time of year, but short-term factors have caused this, with cooler weather, lower renewable generation and uncertainty surrounding future LNG supply being the major culprits. The storage situation continues to entice more value into prices as it poses a significant risk to be low on supply as the next winter approaches. Levels could get higher as we progress into the summer when temperatures inevitably rise, but it is likely that we will go into the next winter with much lower levels of storage going into the next winter when compared to the last two, which will keep prices elevated.
This information is provided by our HCC Market partners, Assured Energy, who are part of The Consultus International Group. Any information provided is given on an advisory basis and both HCC and Assured/Consultus are in no way liable for any action taken by the reader with regards to their energy purchasing.
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