UK energy exports to Europe hit record levels
The UK has been exporting record levels of energy to Europe after ships delivered vast quantities of liquid gas to British ports from around the world.
Both gas and electricity exports to the continent have surged in recent months as prices in Europe climb above those in the UK.
It comes amid efforts to use the UK as a "bridge" to Europe for international supplies of gas to replace those from Russia.
Ying-Chin Chou, senior gas analyst at S&P Global Commodity Insights, said pipelines sending gas from Britain to the continent had been “maximised” since early April, with British prices at a "substantial" discount to the export market.
S&P data shows Britain has been exporting gas to Europe rather than importing since around February, with far higher exports than the 2016-2019 average.
Rob Lalor, director of analytics at electricity market specialists EnAppSys, said a similar trend has been seen more recently with electricity.
“Since May 9 our power prices have dropped off, whereas in Europe they have pretty much stayed as they were over the previous months," he said.
“That is pushing power into the continent. Looking back to the start of 2015, I can’t see a comparable period.”
The high level of exports comes as British households are hit with soaring energy bills.
The price cap on energy bills climbed 54pc in April pushing average energy bills up to £1,971, a key driver of the cost-of-living squeeze.
Regulators are planning to update the price cap more regularly to try to pass wholesale costs on to consumers more quickly.
However, analysts at Cornwall Insight predict the cap could hit around £2,600 when it is next reset in both October and in January.
Wholesale energy costs started climbing rapidly last September amid a global shortage of natural gas as countries reopened from the pandemic.
Russia was accused of worsening the squeeze by restricting supplies to Europe at the time.
Its war on Ukraine launched on Feb 24 has added to the pressure on prices as Europe scrambles to replace Russian supplies and cut Moscow off.
Much of the extra gas to Europe is coming in the form of liquified natural gas (LNG) on ships from around the world.
However, many EU countries have limited capacity to process this back into gaseous form, meaning some is being sent to terminals in Britain and then piped on to Europe, leading to the high gas export levels.
Not all of the extra gas is being sent on to Europe, however, partly because of limited capacity on the pipelines.
This, in turn, has given UK power stations access to relatively cheap gas, helping to push power prices unusually lower than those in Europe.
Gas is used to make almost 40pc of British electricity across the year, and has a significant effect on overall electricity prices.
On Tuesday afternoon, gas was generating 48.9pc of British electricity, with about 10.6pc of total national output from all sources being exported to the continent via cables to Norway, France and Belgium.
Day-ahead prices in Britain were £120 per MWh compared to £190 per MWh in the EU.
It is not clear for how long the trend will last, with Mr Lalor noting the difference between EU and British power supplies is “tightening”.
However, Ms Chou added that forward gas prices show lower British prices compared to Europe across the summer.
“This suggests that some risks are being priced in by the market that the UK-Continent capacity limits will continue to be reached,” she said.
The Telegraph reported on Monday that National Grid had cut the amount of gas it is accepting at Milford Haven terminal in Wales over fears of oversupply.