Day-ahead natural gas prices continue their descent

July 7, 2014 | By

Day-ahead natural gas prices in the U.K. and continental Europe continued to fall in June after reaching multi-year lows in May, according to data from Platts.

In the U.K., prices were down 13 percent month over month and down 35 percent year over year, while the Dutch TTF -- continental Europe's most liquid natural gas trading hub -- were down 9 percent month over month and 34 percent year over year.

"The continued slide in U.K. spot gas prices came on the back of high storage levels and ample supplies, including the regular deliveries of liquefied natural gas from Qatar," said Alex Froley, Platts energy analyst. "Also, export potential for U.K. gas was hampered mid-month by a two-week outage of the U.K.-Belgium Interconnector pipeline."

Lower gas prices have been encouraging the use of natural gas-fired generation in the U.K. Gas-fired power plants consumed an average 48 million cubic meters per day in June 2014 -- up 14 percent from June 2013, and the highest total since February 2013.

Large additions of coal-fired capacity days have served to extend current oversupply with two coal-fired plants coming online recently. A 764 MW unit at RWE's new Hamm plant started commercial operation July 2, while EnBW's 912 MW RDK 8 plant at Karlsruhe began June 23.

New thermal plants, whether gas- or coal-fired, will struggle to make financial returns in the wholesale market at current price levels, according to utility officials.

In June, U.K. power market prices continued to go down -- 8 percent month over month and 23 percent year over year. Lower natural gas prices and higher wind power output have helped suppress U.K. spot prices this year -- at the same time the summer months are beginning to show the price effects of growth in solar capacity.

U.K. solar capacity has reached 4.5 GW, up from 2.7 GW at the end of 2013, according to the Solar Trade Association. On the longest day of the year, June 21, with 16 hours of daylight, solar would have met nearly 4 percent of total U.K. demand, the association said.

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