Energy and Utility Management Consultants

2011 - A Year of Ups and Downs

December 2011


There is no doubt that 2011 was an eventful year, not least of all in the energy market, and the wholesale prices reacted accordingly, but not always in the way you might expect. The start of February saw the Egyptian revolution with the then President Hosni Mubarak resigning after a peoples revolt which saw violence and demonstrations across the country. As a significant producer of oil, it was predicted that this would lead to an embargo on oil exports whilst a new government was put in place, and then; what if said government made wholesale changes to the entire oil export policy? It was these fears that saw a push on the market prices, rising by an average of 8% over the month. Much like in Egypt, the Civil War in Libya during 2011 caused ripples in the market - although one of the top 20 major oil exporters, the duration of this unrest, culminating in the death of Muammar Gaddafi in October, covered almost the entire year, so the exact market effects are impossible to pin-point. On the 11th March 2011, the Japanese Tsunami struck. This natural disaster cost more than 18,000 lives and destroyed over 200,000 homes. As well as the humanitarian disaster, the subsequent near meltdown of the Fukushima power plant raised global fears not only of the expelled radioactive material - something that is still ongoing with final repercussions not yet identified - but also the very fact that Japan was heavily reliant on nuclear power (almost 30% of total generation). As the country pulled nuclear power stations from the grid, they had to switch to other sources to meet (admittedly diminished) demand. The first port of call was Liquefied Natural Gas (LNG); with diversions being made from many countries to allow Japan to fulfil demand in a time of serious need. Naturally, the extra competition for this LNG caused prices to increase again, with a knee-jerk reaction increase of some 5% in the following fortnight. In reaction to the near meltdown of Fukushima, Germany pulled 20% of their nuclear fleet offline with immediate effect. This too added strain as their energy imports increased to cover this shortfall. At the start of May the long-time number one Most Wanted Man, Osama Bin Laden, was killed following a US led storm in Pakistan. Again, further uncertainty followed with speculation that Pakistan had been harbouring Bin Laden, leading to stressed relationships across the globe. Although Pakistan itself is not a major producer of oil, political tensions often impact markets. In this case the impact was favourable, and the following fortnight saw a continued averaged drop of almost 8% in wholesale prices. A nice plateau followed, even during the atrocious rioting at the start of August in London, Birmingham, Liverpool and, to lesser extents, several other cities across the UK. Several new electricity generators were announced during 2011, with energy coming from everything from bio-mass to nuclear, and a forecast mild winter added to confidence in the grid coping with demand during this period. November saw the government make a U-turn on their policy to increase renewable power, by cutting the dividends paid for FiTs (Feed in Tariffs) by half and drastically reducing the incentive for domestic and commercial users to install solar panels to their properties, generating renewable power to be returned to the grid, and to fulfil their own power needs. Speculation arose that the Big Six energy suppliers may have had a hand in this cut, but who can say for sure...?   More recently, a new treaty has been agreed to take over from where the Kyoto Protocol leaves off in 2015 - the positive action should see changes in the entire industry as the UK look to move towards a low-carbon future, but as this is a long-term plan we don't expect any drastic market impacts for the time being. Shale gas generation also built up a head of speed this year, but is yet to be widely adopted in the UK owing to environmental concerns. And all the while, we've had the Eurozone Crisis to deal with!   As a company, we at Clifford Talbot Partnership have enjoyed another busy year, solidifying existing long-term business relationships, and welcoming many new clients to our services with whom we hope to enjoy equally long relationships. The work we've carried out for our clients not only sees them reaping the rewards in time and money saved, but also helps re-establish our position as one of the leading Utility Consultants in the UK. This is a label we're very proud of, and in an effort to stay ahead of the game 2011 several new members of staff were appointed to our already highly qualified and experienced teams in order to offer the best possible service to our clients, both present and future. As we anticipate another eventful, interesting and challenging year ahead in the energy markets, may we wish you all a very Merry Christmas and a Happy New Year.





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