With the effects of COVID-19 permeating all parts of the energy value chain, in this week’s Energy Perspective our Wholesale Manager, James Brabben, takes a look at how it is impacting wholesale pricing and the electricity generation fleet, both now and, potentially, in the long term.
Order of play
We at Cornwall Insight have been closely tracking the impact of COVID-19 so far on the market, with many of the effects seeming to come from the classic economic playbook. A demand shock occurs, leading to vast oversupply of commodities and goods, followed by a sharp fall in those goods value both in the near term and potentially longer term. Existing assets have their values re-adjusted and new investors re-assess their business models again. It is a story played out over previous crashes, bubbles and depressions.
What is more unique this time is the uncertainty around the potential length of the impact of COVID-19 – how and when a recovery occurs and if that recovery brings the economy and the energy markets, back up to “pre-impact” levels. This is especially true for energy markets in remaining as unscathed as possible on the road to net zero.
We have been analysing all of these permutations recently to assess the potential outcomes and consequences for the energy markets, something we distilled into a webinar on 9 April. Our analysis so far highlights the magnitude of the changes and suggests a potential new reality, at least over the course of 2020, for the GB wholesale market in terms of market pricing, consumer demand patterns and future asset development…
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