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Front season and oil prices down, wind output low, while sun shines

Stay updated on energy market changes over the last 7 days with Haven Power’s market report.

Here’s a summary of the week starting 4th June:

  • Gas-fired generation made up for a distinct lack of wind generation throughout week 23.
  • Oil and gas continued to drive seasonal products.
  • Brent Crude oil benchmark moved up and down during the week.
  • Day-ahead prices fell over the course of the week, despite low wind.

Prompt/Day-ahead Power

Prompt prices weakened over the course of the week, with an average of £57.59/MWh. However, this compares favourably to the average of £36.35/MWh for the same week in 2017. Day-ahead prices were at their peak for delivery on 5th June at £57.85/MWh. The drivers for this were poor wind output forecasts and National Balancing Point (NBP) gas price strength due to maintenance at the Bacton entry point. Prices for day-ahead delivery fell over the course of the week, despite wind output getting progressively lower. Without reasonably high solar output over the week and falling demand, prices would probably have been on an upward trajectory.

Imbalance Prices

Single imbalance prices during week 23 averaged £51.87/MWh, down over £9/MWh on the previous week despite there being no periods of negative pricing.

The week’s highest final price of £148.50/MWh was for settlement period 34 (16:30-17:00) on 4th June, when Killingholme Combined Cycle Gas Turbine (CCGT) plant offered to increase generation output. Other significant contributors to the rise in output were Cottam coal-fired generation plant and Ffestiniog pumped storage hydro plant.

The lowest price during week 23 was for settlement period 26 (12:30-13:00) on 6th June, when National Grid took actions to reduce the amount of generation on the system. Pembroke power station, a CCGT plant, paid £36/MWh to take itself out of the UK generation mix. Ffestiniog pumped storage hydro also featured during this settlement period; National Grid paid £150/MWh for its services.

Renewables and other

The story of week 23 was similar to the previous 7 days in terms of renewable output, with wind generation struggling and solar output reasonably high.

Solar output peaked at over 8GW on 6th June, while wind was dwindling – over the course of the day – to less than 2GW. The rest of the week was the same, with wind output struggling between 1GW and 2GW, and gas-fired generation required to make up for the lack of baseload wind output. Coal-fired generation also featured to a limited extent, due to its lack of profitability at present.

Seasonal Contracts

Secure and Promote* (Seasons +1, +2, +3, +4) baseload contracts all experienced losses over week 23, continuing the current bearish trend downwards. The falling oil prices, with NBP gas and subsequent power prices following suit, drove prices in the early part of the week. NBP prices came under additional pressure from the prospect of liquefied natural gas (LNG) cargoes arriving in the UK this month. This will improve supply levels, generally a bearish factor for NBP and power prices.

The opposite trend occurred in the latter half of the week, as oil prices rallied again and pushed up NBP and power too. Additional strength in UK power prices came from European carbon. Friday saw oil prices tick down once again, as an investment bank’s price forecast cited surging U.S. output, and lower demand in China, as reasons behind oil prices declining.

 

*For more information about Secure and Promote, please consult this Ofgem web page.

Annual Power

The annual power graph shows how the value of an annual power contract changes over time. The annual contract value is the average of the front two seasons, currently Winter 18 and Summer 19.

To help you make sense of the industry, you can also use our jargon buster and handy guide to Third Party Costs (currently 60% of your bill). And for interesting articles and useful insights, look out for our blog.

Report written by Thomas Stebbings and Andrew Jarman, Haven Power’s Portfolio Analysts. To speak to them, or the rest of our Flex & Portfolio Management team’s analysts, call us on 01473 707755 quoting reference HP250.

Disclaimer

Although we’ve made all reasonable effort to verify the information in this report and provide the highest possible accuracy, Haven Power Limited gives no warranty – express or implied – in respect of this information. Furthermore, our provision of this report does not constitute advice of any kind and readers should not take it as the basis for any commercial or financial decisions. You should make any such decision based on your own records, knowledge and perception of power market data, supplemented with appropriate independent expert advice when required.

 

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