Weekly Energy Report - UK sets new ‘coal-free’ record
For your weekly update on energy market changes, read the Haven Power market report. Here’s what happened over the last 8 days, starting Monday 15th April:
- The UK set a record of 90 consecutive hours without coal-fired generation.
- High output from renewables peaked on 15th April with a 50% contribution to the generation stack.
- National Grid called upon pumped storage hydro, setting the high price for the week.
- UK power curve steered by weak gas prices, and strong coal and carbon performance.
Read more below:
During week 16, the prices for day-ahead baseload delivery were at their highest for delivery on Tuesday 16th April, when wind output was expected to drop sharply compared to the previous day. This reduction would mean that additional generation capacity – including the more expensive gas-fired plant – would be required, causing the hike in price.
The lowest price of the week (£42.66/MWh) was for delivery on Thursday 18th April – partly driven, again, by expected wind output levels. With wind (and temperatures) predicted to rise, the expectation was for a reduction in demand overall, and therefore a corresponding drop in demand for more expensive forms of generation.
Temperatures during the four-day bank holiday weekend were comfortably above seasonal norms, meaning less demand for gas for heating. The significant reduction in overall demand (due to decreased industrial activity) led to low prices for day-ahead delivery on Sunday 21st April, although these were not the lowest for the week.
Imbalance prices during week 16 averaged just under £43/MWh, with a range of almost £160/MWh between the high of £98/MWh and the low of -£61/MWh.
The price for settlement period 28 (13:30-14:00) on Thursday 18th April was the lowest for the week. This settlement period coincided with peak solar for the day, which could have suppressed demand by such an extent that National Grid took action. The final price was set by the system operator accepting a bid (for -£61/MWh) from unit 1 at Drax to reduce output slightly. This price would be enough to cover the lost subsidy payment from not generating.
The highest price for the week, of £98/MWh, was for settlement period 17 (08:00-08:30) on Wednesday 17th April. The UK system had been short of generation for several half-hour periods leading up to this time, and National Grid had to bring more generation onto the system following it. Period 17 coincided with the usual morning ramp-up of demand, before there was much generation output from solar installations. The final price of £98/MWh was set by accepted offers from Dinorwig pumped storage hydro to increase generation output. The same provider also set the final price in the two settlement periods that followed.
Renewables and other
Output from renewable generation assets was strong during week 16, with high wind and solar at the start of the week and a record for no coal-fired generation set on Thursday 18th April. Although wind output subsided over the weekend, solar output stayed strong.
At around 13:30 on Monday 15th April, wind and solar reached their week’s peak by contributing 19.6GW – or 50% of the UK generation mix. Slightly earlier in the afternoon on the same day, wind output achieved its highest level of the week (12GW). Between 23:00 on Thursday 18th April and 17:30 on Monday 22nd April, there was no coal-fired generation contributing to the UK’s total mix. This period of 90 consecutive hours set a record; the previous longest period of consecutive ‘coal-free’ hours was 76, between 21st and 24th April 2018.
Output from solar installations reached 9.9GW on Saturday 20th April, as the UK basked in sunshine during the Bank Holiday weekend.
The link between expected wind output and the direction of day-ahead prices was not as strong as in recent weeks. This may have been due to the reduction in demand caused by the Bank Holiday, and the increased temperatures further pressuring demand on other fuel sources.
Secure and promote* (Seasons +1, +2, +3, +4) baseload contracts lost value over the course of a shortened week of trading. The front seasonal contract, Winter-19, finished the week at close to £1/MWh less than where it opened; summer-20 suffered less severe losses.
Prices were on a downward (bearish) trajectory at the beginning of the week, following their gas counterparts. Both the low demand for gas for heating and an expectation of warmer temperatures weakened the front of the curve. With demand down, and further LNG (Liquified Natural Gas) deliveries expected in the UK over the Bank Holiday weekend, there appear to be no supply concerns on the horizon.
Wholesale prices switched direction during trading on Wednesday 17th April, with strengthening coal and carbon prices the more prominent drivers. The extension to the Brexit deadline (now 31/10/2019) has buoyed European carbon prices by reducing concerns that the market would be awash with carbon allowances, pressuring the price.
Prices once again dropped during the final day of trading for the week, with a bearish National Balancing Point (NBP) gas market pressured by the ending of a Norwegian gas field outage.
*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 19 and Summer 20.
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 Ben Symonds, Haven Power’s Portfolio Analysts. To speak to them, or the rest of our Flex & Portfolio Management team’s analysts, call 01473 707755 quoting reference HP250.
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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