Electricity and gas market prices in the UK have risen to unprecedented levels in 2021, with the media warning of a potential energy crisis, in addition to possible gas shortages to come this Winter. Electricity in Winter-21 contracts hit highs of £228.50/ MWh, with gas reaching as much as 218p/thm.

• Several gas interconnectors across Europe were forced to temporarily close, in order to perform planned maintenance, which exacerbated the already tight gas supply across Europe.
• LNG deliveries into Europe have been lower than anticipated throughout 2021, as Asian LNG prices have traded at a premium to the EU market equivalents, thereby diverting LNG away to Asian buyers. 3.
• Limited gas injections into storage across Europe reflected in multi-year storage lows
• The Nord Stream 2 pipeline has led to upside risk premiums in the gas market, as a result of uncertainty around the start date, in addition to the expected volumes to flow through the pipeline.
• A fire on the British-French interconnector removing potential import volumes of electricity from France.

Many market background drivers have appeared over the last few months. Driven primarily by international factors, which have not only affected gas prices, but electricity issues in the domestic market as well.

These factors have had direct impacts, with current prices as shown below. Figure 1 shows the increases against this time last year. 

Figure 1