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Low wind bolsters prompt prices; falling prices push power curve down

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 28th May:

  • Low wind output bolstered prompt prices for the majority of week 22.
  • Wind failed to generate above 1GW for several days during the week.
  • Rising fuel costs saw power prices dropping towards the end of the week.
  • Brent Crude oil prices fell after rising U.S. output and speculation about OPEC increasing supply.

Prompt/Day-ahead Power

Prompt prices were strong yet again during week 22, with prices for baseload delivery averaging over £57/MWh.

Day-ahead prices peaked at £60.17/MWh for delivery on 28th May; the highest for over 2 months. This was probably due to low wind output, which meant more expensive gas-fired generation had to fill the void. Prices on 29th were the week’s lowest, down because of higher wind output. However, losses were stemmed as the UK was exporting via the Dutch interconnector, where market prices were higher. Day-ahead prices made significant gains once again for delivery on 30th, as wind output plumetted; low wind for the rest of the week supported prompt prices.

Imbalance Prices

Single imbalance prices during week 22 averaged £60.54/MWh, with no periods of negative pricing.

The highest price of £150.89/MWh was for settlement period 36 (17:30-18:00) on 30th May. During this period, National Grid paid £148/MWh to Connah’s Quay Combined Cycle Gas Turbine (CCGT) plant to increase generation output. It produced over 115MWh during this time to contribute to easing system stress. Other significant contributors during this settlement period included Fiddlers Ferry (£140/MWh) and Rye House CCGT plant (£95/MWh).

The lowest price during week 22 was for settlement period 12 (05:30-06:00) on 28th May, when the UK was over supplied. During this period, National Grid paid Immingham Combined Heat and Power (CHP) plant £18.99/MWh not to generate, in an attempt to re-balance the system.

Renewables and other

Week 22 was mixed for renewable generation, with low levels of wind and high levels of solar throughout.

Solar output peaked at over 7GW on 28th May and reached around 6GW during the rest of the week. In contrast, still conditions meant that at times – particularly during the second half of the week – wind output struggled to break 1GW, well below the average so far this summer. At times of low wind output, more expensive gas and coal-fired generation is required; this pushes up day-ahead prices and emits more carbon into the atmosphere.

Seasonal Contracts

Secure and Promote* (Seasons +1, +2, +3, +4) baseload contracts all experienced losses throughout week 22, with the winter products experiencing the largest decline. The winter-18 contract opened bullishly at the beginning of the week, with prices tracking gains on the National Balancing Point (NBP) market, supported by stronger coal prices. Prices for all 4 contracts tumbled on Friday as a direct result of NBP gas contracts falling. Dropping near-term gas prices, on the back of lower UK and continental demand, fed through to longer-term products and had a knock-on effect to power prices.

The easing of the Brent Crude oil benchmark on Friday may also have helped force gas and subsequent power prices down. Oil prices fell on the back of rising U.S. production and the possibility that OPEC and its allies may decide to boost output.

 

*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, 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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