The Haven Power market report updates you on energy market changes over the last 7 days.
Here’s a summary of the week starting 9th April:
• High solar output reduces demand on the UK system and outshines coal.
• Lower than predicted wind forces National Grid to take actions to fill the gap.
• Brent Crude oil prices surge to 3-year high, reaching over $72/bbl .
• Seasonal contracts up after commodity prices strengthen.
Friday the 13th proved lucky (for some) as prices for day-ahead baseload delivery reached a high of £57.96/MWh, with wind output for the day averaging less than 2GW. In contrast, the cheapest price for baseload delivery during week 15 was for delivery on Tuesday 10th April – when the forecasts were for high wind. These predictions offset bullishness coming from the National Balancing Point (NBP) gas day-ahead market and resulted in a price of £50.00/MWh.
Single imbalance prices during week 15 averaged £62.17/MWh; over £13/MWh higher than the previous week.
The price for settlement period 25 (12:00-12:30) on Friday 13th April was the week’s highest, at £158/MWh. During this period, National Grid paid Killingholme CCGT (combined cycle gas turbine) £158/MWh to generate, easing some system stress. During this time, the System Operator also paid Ffestiniog pumped storage hydro £145/MWh, Corby CCGT £112/MWh, and Foyers pumped storage hydro £110/MWh to help increase electricity supply. Also on 13th April, lower than forecast wind output resulted in National Grid having to pay for relatively expensive generation for much of the day to help fill the void.
The week’s lowest price of £6.52/MWh was for settlement period 42 (20:30-21:00) on 10th April. During this period, Dinorwig pumped storage hydro offered to consume electricity at a price of £0.00/MWh to take excess supply off the grid. Pembroke and Saltend South CCGT plants paid to take themselves out of the UK generation stack, as they were no longer required to run and could save on fuel costs.
Wind generation during week 15 again showed large fluctuations in output, and exerted an influence over day-ahead prices.
The highest wind output levels were on Tuesday 10th April, climbing to 8.3GW from less than 1GW the day before. Wind output retreated to make way for still conditions on Friday 13th and Saturday 14th, before rising once again to over 7GW on Sunday 15th.
Solar generation was benign for the majority of the week, with the exception of Saturday 14th April. During the early afternoon, just over 7GW of solar output was seen on the system – enough to reduce national demand to 25.8GW; one of the lowest levels for the week. When solar output was at its peak for the week, there was seven times more solar generation than coal-fired generation in the UK fuel mix.
Secure and Promote* (Season +1, +2, +3, +4) baseload contracts gained £1.34/MWh on average during another bullish week of trading. Season +4, the summer-20 baseload contract, was the week’s largest mover; an increase in value of around £1.70/MWh between Monday 9th and Friday 13th.
Week 15 saw price rises in general for coal, gas and oil commodities. Strength in the European Union Allowance (EUA) carbon market and European coal market pushed up seasonal contracts on Monday, with the winter-18 contract gaining £0.50/MWh during the day. On Tuesday, bullish influence also came from the Brent Crude oil benchmark trading strongly. This resulted from the belief that trade disputes between the US and China are now resolved; Brent Crude oil finished the week at a 3-year high of over $72/bbl.
With gas storage levels currently at a low, NBP gas prices are bullish. In addition, they’re an even more significant driver of UK power prices now thanks to strong carbon prices pushing out coal-fired generation, due to a reduction in profitability.
*For more information about Secure and Promote, please consult this Ofgem web page.
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 blogs.
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, on 01473 707755 quoting reference HP250.
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