GB Power Prices 'Depend More on Gas Markets': Analyst

British electricity prices are being ever more influenced by the price of LNG, which has enjoyed "unprecedented momentum" in recent months, said analysts at Cornwall Insight March 10.

Asian spot LNG prices reached an all-time high of about $30/mn Btu January 15. At that point, LNG sendout from UK terminals was very low as the spare cargoes were going to the Far East. However, LNG’s recording-break run has ended in the last few weeks, with prices having fallen significantly. In fact, Cornwall Insight records showed a 71% decline in prices on January 29 than the same day a week earlier.

Cornwall said: "Throughout this dramatic price growth and subsequent decline, LNG prices have had ramifications for the NBP gas price in GB. LNG is often seen as the marginal source of gas supply in GB and much of Europe, and we have observed gas prices become quite sensitive to LNG price movements in recent years. 

“As the spot Asian LNG price soared, GB day-ahead gas prices reached their highest level in three years, hitting 73.50p/th on 12 January, whilst gas contracts along the forward curve also saw significant price growth. This impact also fed into the GB power market, with day-ahead power prices soaring (although this was also due to tight power supply margins). Power contracts along the forward curve also saw significant growth. As gas-fired power stations remain the marginal generators in the power market, movements in gas prices remain important for electricity prices.

“The susceptibility of GB and European gas markets to global LNG prices may be set to increase. With no concrete plans for new long-term storage facilities in the UK and declining UKCS supplies, it could point to a greater LNG dependency in the coming years," it said.