Paul Cook, Energy Trader at TEC
Britain will have enough energy supply this winter according to the national grid operator. In its 2025 Early View of Winter, the National Energy System Operator (NESO) has projected the strongest electricity operational margins for the UK grid since 2019. This comes against the backdrop of heightened geopolitical uncertainty which could affect commodity markets this winter.
We sat down with TEC’s Energy Trader Paul Cook to get an expert analysis of NESO’s early winter forecast and how global affairs could impact the markets.
What are the headlines from the NESO early winter outlook?
NESO has reported that it expects to have sufficient supplies this winter and that we are not expecting any major outages. There could be some days when supply is tight, but NESO has the tools in place to make energy available. This forecast represents the highest anticipated operational margin since 2019/2020, and that was in the pandemic when demand was low. Demand would be considered ‘normal’ now, but the system is able to cope better. This is largely thanks to the growth in battery storage capacity, more available gas-fired power generation, and an increase in renewable energy.
What are the main takeaways from this outlook for TEC members?
Members can feel assured that in the winter months, the electricity system will be comfortable and cope with any unplanned outages. Obviously, it is important to note that this is an early forecast, and the full Winter outlook will be published in October. There are variables which can come into play the closer you get into Winter such as how much wind and sun we will get and the impact this has on gas storage. From a TEC member perspective, this outlook provides certainty and enables institutions to carry on with business as usual.
Could the uncertain geopolitical situation impact supply this winter?
There are always risks in the commodity markets and things can change very quickly as we have seen recently with the situation between Iran and the US. Normally LNG would come through the Strait of Hormuz but there is a possibility that Iran will close that now. If this happens, it will increase LNG costs because delivery time frames and shipping costs will go up. Fortunately, most of Europe, including the UK, gets most of the LNG from the US. However, the LNG demand from Asia is high due to cooling demands, and if the price is more favourable from Asia, ships will simply turn round and head there!
From a TEC perspective, we’re very well covered, gas and power-wise. As our members know, we follow the Risk Management Policy Procedure (RMPP) so, we have percentage bands that we would cover within a particular season. Prior to the current escalations in the Middle East, we had already taken the position to go heavier earlier, so we’re ahead of the game.
How does TEC’s forward-buying strategy help protect members from shockwaves caused by global conflicts and supply issues?
As the Members know, we buy energy six seasons forward, so we’re already very well covered for Winter 2025 and Summer 2026. This provides the membership with protection from volatile energy prices. It also ensures budget certainty for institutions, which is particularly important in a financially challenging environment.
During the COVID period, we recognised that energy prices were the lowest they would ever be, so we went over and above with our forward buying strategy. So, our institutions were very well protected during the recent energy crisis after Russia invaded Ukraine.
If you would like to find out more about Neso’s Early View of Winter forecast, please get in touch with your MSA.
You may also be interested in our upcoming Midsummer Market Update Webinar on the 16th July, if you would like to register, please get in touch with your MSA.
