Following an increase at the end of 2016, wholesale energy prices fell and were less volatile in Q1 2017. See Wholesale Price Trends and Investment and Sustainability.
GB continues to receive its gas supplies from a diverse range of sources, including GB North Sea fields, Norway, LNG, interconnector flows and storage. See Security of Supply.
Coal’s share of the electricity generation mix in Q1 2017 remains low by historical standards. Gas’ share remained stable at 40%, while renewables contributed around 27% of the mix. See Security of supply.
The wholesale price of gas and electricity are key market outcomes that have a significant impact on retail bills. Understanding how and why wholesale prices have changed help us understand why retail bills have changed.
Day-ahead gas prices over the past couple of years have been on a broadly downward trend and in April 2016 reached their lowest levels since November 2009, below 30p/therm.
Day-ahead prices are a good indicator of the short-term price of gas in GB. However, Day-ahead prices are just one measure of the price of gas. Suppliers often buy most of their gas months or even years in advance of when it will be delivered. Therefore, Day-ahead prices may not necessarily reflect the price that suppliers will have paid for their gas.
Electricity wholesale prices in GB over the past decade have largely been driven by changes in the gas price. This is because gas-fired generation is often the marginal source of supply and hence sets the electricity price. Changes in carbon prices have also influenced electricity prices in recent years.
Day-ahead prices are a good indicator of the short-term price of electricity in GB. However, Day-ahead prices are just one measure of the price of electricity. Suppliers will often buy most of their electricity months or even years in advance of when it will be delivered, so Day-ahead prices may not necessarily reflect the price that suppliers will have paid for their electricity.
The ‘baseload’ rate refers to a contract for electricity that is produced continually throughout the day and is distinct from ‘peak rates’ when electricity is bought/sold for consumption at peak times (7am to 7pm).