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4 great reasons to review the energy market, week by week

Even if you don’t watch the energy market closely, you probably know that prices have – generally – been rising this year. Naturally, this is affecting UK businesses of all sizes – including yours, no doubt.

There are positive steps you can take to become more energy efficient – and reduce your exposure to some of the rising costs. It also makes sense to gain a better understanding of what you’re paying for – see our video narrated by TV’s Johnny Ball – and be as informed as you can be.

Haven Power’s weekly market report – here’s a recent edition – keeps you updated on energy market changes from the previous 7 days. Businesses find it useful because it:

  1. Allows you to follow market trends and may provide intelligence for your decision making
  2. Provides high level explanations behind the macro factors influencing power prices
  3. Gives some description on how renewables in the UK fuel mix are steering short-term prices

 

More about the weekly report

The report kicks off with a bulleted summary of headline facts before providing more detail on the following market sectors:

 

Prompt/Day-ahead Power

As the name suggests, “Prompt” prices relate to the electricity that your supplier will provide within the current calendar month. This includes both “Day ahead” and “Week ahead” contracts.

In addition to handling short-term contracts such as “Day ahead” and “Week ahead”, the industry also trades mid-term (months/quarters) and longer-term contracts (6 month seasons). The seasonal contracts section discusses movements and drivers of the Front 4 seasons, the most liquid (frequently traded) seasonal contracts.

 

Imbalance Prices

One of the key tasks that National Grid performs is balancing the system second-by-second, to ensure that supply always meets demand. ELEXON is a private business that compares the amount that generators say they’ll produce with how much electricity suppliers, traders and distributors say will be consumed.

Each day is divided into a series of half-hourly settlement periods. ELEXON works out the difference between the contracted (traded) volume of each party with the metered (actual) volume consumed within each period. It then applies the price to the relevant parties’ imbalances – determining their imbalance charges.

When National Grid needs more or less power to balance the system, they will reward generators for either reducing output or removing themselves from the system completely, and for supplementing supply by increasing their generation.

 

Renewables and other

By looking at wind, solar and hydro output, this section provides a weekly commentary on the impact of renewables on the UK’s generation mix. For example, in the week starting 10th September 2018, wind and solar contributed almost 40% of the country’s total electricity.

 

Seasonal Contracts

In addition to handling short-term contracts such as “Prompt”, “Day ahead” and “Week ahead”, the industry considers mid- and long-term contracts for the following four seasons.

Taking the current season as base, or zero, these four periods are known as Seasons +1, +2, +3, +4 (with +1 also called the “Front season” – at the time of writing, winter-18).

 

Annual Power

Haven Power’s weekly report includes an annual power graph showing how the value of an annual power contract changes over time. The annual contract value is the average of the front two seasons.

 

If you’d like to discover more about Haven Power’s weekly market report, and how our energy experts can help you, please get in touch using our contact form.

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