London’s Warmest New Year’s Ever Brings Relief to Energy Markets
London’s Warmest New Year’s Ever Brings Relief to Energy Markets
(Bloomberg) -- New Year’s Eve is set for record-breaking temperatures in London as gusts of warm wind sweep across England, bringing much needed relief to an energy market facing an unprecedented crisis.
The temperature in the British capital could rise as high as 15 degrees Celsius (59 degrees Fahrenheit) on Dec. 31, according to a forecast from the U.K.’s national weather service. It’s likely to be even warmer in the southwest of the country, where the previous record for the warmest New Year’s eve in England was set in 2011.
“We can safely say it most likely will be London’s mildest New Year’s Eve on record,” said Craig Snell, a forecaster at the Met Office. “We can’t link one event to climate change, but a warmer climate will naturally infer it will be warmer and warmer.”
Surging natural gas and power prices in the U.K. this year caused a crisis among the country’s energy suppliers, with more than two dozen going out of business. The government is in talks with the energy sector to protect consumers from the sting of high prices. One proposal is a private loan that would help energy companies cope with the cost of taking on clients of failed rivals to limit a sharp increase in bills starting in April.
Unseasonably warm temperatures in the U.K. and Europe are helping to drive down short term power prices from record-high levels. Electricity prices for next day delivery in Britain and Germany on Wednesday plunged to the lowest since early November.
Along with mild weather, strong wind speeds will drive Europe’s wide network of turbines to ease the need to burn expensive gas and coal.
Still, the brief respite is far from an indication that the region’s energy crisis is nearing the end. German power for next year, one of Europe’s benchmark electricity contracts, is up more than 300% this year, a sign that high prices are here to stay.
Rising costs are leading some industrial users to cut production. One of Europe’s largest aluminum plants, run by Alcoa Corp. in Spain, announced plans on Wednesday to halt production for two years to cope with persistently high energy costs.
U.K. households are set for an 18-billion-pound ($24 billion) hike in energy bills in 2022, according to Investec Plc. As natural gas prices surged almost 400% this year, the price cap -- the ceiling for what firms can charge most customers -- is on course to increase by 56% in April, analysts including Nathan Piper have said.
Warm weather in Britain is set to ease next week, bringing more normal, cold January temperatures, according to the Met Office.
By Tuesday, Jan. 4, London daily average temperatures will dip back down to the long-term normal for this time of year of about 5 degrees Celsius, according to the European Centre for Medium Term Weather Forecasting. The daily average forecast for Dec. 31 is 12.5 degrees Celsius, with a high just above 14 degrees that day.
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