Evolution of UK balancing flexibility

UK engines & batteries face a rapid transition over the next 5 years to focus on Balancing Mechanism value capture. We look at how BM flex provision may change.

Timera Angle

Timera is moving office

When? On 1st Sep 2019 Timera Energy is moving offices from its current 110 Bishopsgate address.

Where? We are moving to Level 12, 30 Crown Place (the Pinsent Masons building), 5 mins from our current address.

Why? Timera is growing fast (more exciting news to follow shortly).  We need more desk & meeting room space to accommodate our expanding team and client base.

What next? Full details on new address and contact details to follow before the move.

Timera is recruiting analysts

As we continue to expand our team, we have several Analyst positions open.  Why join Timera as an Analyst?

  1. The Challenge: Your focus will be on understanding & analysing the flexibility that lies at the core of the energy transition.
  2. Development: We have a flat hierarchy where analysts interact dynamically with senior team members and clients and have the space to apply initiative and take on responsibility.
  3. Remuneration: Our packages are very competitive and include participation in company growth.
  4. Flexibility: We offer significantly more flexibility and autonomy than other companies, covering e.g. location, work hours & remuneration structure.
  5. Team culture: We have an open, innovative & entrepreneurial environment, working together on a variety of stimulating analytical challenges across the rapidly evolving energy industry.

See Analyst Job Spec and more details on Working with Timera.

New Managing Director joins Timera

We continue to expand our team with May Mannes joining as a new Managing Director.  5 things May has done prior to joining our team:

S&P Global Platts: Director of Content focused on gas & LNG market analysis post acquisition of Eclipse Energy.

Eclipse Energy: Director of Gas & LNG Analysis and of Advisory Services, developing Eclipse before sale to S&P Global.

Statoil: Senior commercial roles across gas & LNG, including managing parts of Statoil’s existing gas contract portfolio & responsibility for long term sales.

Alliance Gas: Head of Business Operations responsible for balancing the trading, end users and wholesale portfolio.

Athletics: British Universities Champion 200m sprint… so she’s pretty quick!

May will focus on developing Timera’s gas & LNG business across asset investment, value management and market analysis.

Our Team: May Mannes

Timera presenting at Flame 2019 on May 14th

Timera will be doing a presentation on Day 1 of the main conference at Flame (14:10) on new sources of gas supply into Europe.  Topics covered to include:

  • Supply: Interaction between Russian imports, LNG imports and North Sea production
  • Pricing: Evolution of European hub pricing dynamics into 2020s
  • Portfolios: How the role of gas is changing within energy company portfolios in response to market evolution & decarbonisation
  • Investment: How market transition is causing a structural shift in gas asset risk/return profiles

Feel free to contact us if you would like to meet at Flame (olly.spinks@timera-energy.com).

UK power demand

UK annual electricity demand has fallen by around 7% over the last 5 years. Will this be an ongoing trend or is demand set to stabilise? Key drivers:

  1. Economic transition: Shift from industry to less power intensive services has pulled down demand over recent years (e.g. decline in steel & automotive industries).
  2. Weather: Last 3 winters have been mild compared to history. Outliers or new normal?
  3. Efficiency: Despite government ambitions, not much evidence of structural efficiency gains to date – and a lack of clear policy incentivisation going forward.
  4. EVs: Electric vehicles likely to materially increase demand from mid next decade.
  5. Next 5 years: Limited industry left to transition, lack of efficiency traction & EV impact support demand stabilisation… caveat economic risks e.g. Brexit/recession.

Another large gas storage closure

Dutch gas co. NAM has notified via Remit its intention to close its large Grijpskerk storage facility (2.8 bcm) by 2021:

  • Next big NW European storage asset closure after Rough (3.4 bcm in 2016)
  • Plays key role in managing Groningen production & providing flex at TTF
  • Puts future of Gasterra virtual storage auctions in doubt (given flex underpinned by Grijpskerk)
  • Evidence of ongoing tightening of gas flex market due to ageing infrastructure & low investment

Timera Snapshot

Behind the rise in global CO2 emissions

The pace of global renewables deployment is accelerating as costs decline. But this chart (from BP’s 2019 Statistical Review) highlights why much more than renewables is required to reduce global emissions.  It shows how reductions in emissions growth 2010-15 were driven by lower growth in power demand & favourable shifts in the fuel mix (e.g. US shale driven switching from coal to gas). Since then emissions growth has been rising. The cause? Carbon intensive power demand growth in developing countries is outweighing the impact of global renewables growth. Watch out for a broader policy response over the next 5 years.

Is global LNG demand growth slowing?

There has been a clear upward trend in Asian LNG demand growth since 2015… that is until Winter 2018-19.  The chart shows LNG demand from the ‘Big 5 Asian buyers’ as well as emerging Asia & Latin America / MENA. Demand across the traditional JKT buyers is down in 2019 vs 2018. Chinese demand is also growing at a slower pace (despite low prices).  Growth in new LNG supply on the other hand has been very strong.  The result?  Surplus cargoes flowing to Europe and TTF pushed down towards Henry Hub.  Asian demand growth in Win 19-20 will be key!

European LNG imports fall, TTF rises

LNG import flows have been a key factor driving European hub prices dynamics over the last year. Apr-19 saw Europe’s highest LNG send out in history as shown in the chart. Volumes were triple the levels seen last summer. But since April, LNG import flows into Europe have started to decline. This has coincided with some recovery in the JKM/TTF price spread in Q2-19.  TTF front month prices are also responding, with Aug-19 up more than 25% since the start of July.

Coal & carbon prices and switching levels

Coal & carbon prices have been trending in opposite directions over the last 12 months. EUA prices have recently moved above 25 €/t. Prices have remained strong in 2019, despite weakening economic conditions and significant switching from coal to gas plant. Coal prices on the other hand have fallen by around 50% since the beginning of Q4-18. Falling coal prices across the last two months have pulled down switching levels, putting further pressure on TTF/NBP.

Will gas & power demand take a hit in 2019-20?

In Jan-19 we flagged the risk of an economic driven demand shock.  Evidence of this is gathering quickly as shown in the charts.  The top chart shows a rapid decline in new export orders in the Eurozone’s biggest economies since last summer (Germany particularly sharp). Consistent with this, the bottom chart shows declining manufacturing data, with a shift from strong expansion in mid 2018 to sharp contraction in 2019. Global central banks are now responding with (yet more) stimulus.  But as things stand, demand may take a hit in 2019. However this is likely to be balanced in the gas market by power sector switching demand given low hub prices.