Weekly Energy Report - Brexit uncertainty increases UK prices
For an update on changes in the energy market over the previous week, read our Haven Power market report.
Here’s a summary of the last 7 days, starting 12th November:
- Uncertainty around Brexit and cabinet resignations helped push up power prices.
- Reaction to the UK capacity market suspension may also guide the UK power curve.
- Wind output steered the UK prompt market again during week 46.
- Fast-response pumped storage hydro set the highest imbalance price for the week.
Week 46 continued the previous week’s theme of wind forecasts driving prompt price movements; day-ahead prices were highest when wind output was expected to be lower. F orecasts for stronger wind generation on 13th November helped ensure that Tuesday’s price increase was lower than on Monday. The day-ahead power price rise that did occur was in response to gains on the National Balancing Point (NBP) for gas.
Much reduced forecasts for wind output on Friday 16th November led to the highest price for the week of £64.35/MWh. Wind output had been around 6.5GW (20% of the generation stack) over the course of the previous day, but there was an expectation of this falling to 3GW on Friday. As a result, gas plants were expected to make up a higher proportion of the UK fuel mix and the power price attracted an extra premium.
Prices for baseload delivery over the weekend were at a discount compared to Friday’s high, as wind was once again expected to make up a larger share of the UK generation mix.
There were no periods of negative imbalance prices during week 46, despite high wind output on most days.
On 14th November, the price of £0.00/MWh for settlement period 6 (02:30-03:00) was the week’s lowest. As often happens when system prices are low or negative, this coincided with high wind output and excess generation - over 1000MWh - on the UK system. Peterhead Block, a Combined Cycle Gas Turbine (CCGT), paid £28.50/MWh to reduce its generation output by 255MWh.
The week’s highest price of £145/MWh was for settlement period 18 (08:30-09:00) on 17th November. The system operator accepted the offers from Dinorwig pumped storage hydro plant (a fast-response generator) to increase output at this price.
Renewables and other
Another relatively windy week in the UK meant that output from offshore and onshore wind installations produced an average of 8.5GW across the week. Output from solar is decreasing week-on-week as daylight hours shorten and, on Friday 16th November, solar output barely broke 500MW at peak output.
Looking at the generation stack on 14th November, when wind output averaged 11.5GW, there was just 9.5GW and 3.1GW of output from gas and coal-fired plant respectively. In contrast, when wind output was just 3.9GW on 16th November, gas output averaged 15GW, and coal 5.3GW.
Secure and promote* (Seasons +1, +2, +3, +4) baseload contracts experienced mixed movements over the course of the week. These coincided with news about a potential Brexit deal, government resignations and the suspension of the UK capacity market all having an apparent impact upon the market’s turbulence.
Most of the seasonal contracts gained some value during trading on 12th November, as Saudi Arabia announced a 500,000bpd (barrels per day) reduction to output. The Brent Crude Oil benchmark then lost value the following day, after President Trump pressured the Organisation of Petroleum Exporting Countries (OPEC) to not reduce its output.
The most significant movements came on Thursday 15th November. A dramatic fall in the value of the pound against the euro acted as a bullish driver for the British gas market. NBP gas contracts increased to retain the same spread (difference in price) against euro denominated products.
*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 Summer 19 and Winter 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 Ben Symonds, 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.
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.