Cooler weather dampens demand
1st August 2018
The Haven Power market report keeps you up to date with energy market changes over the last 7 days.
Here’s a summary of the week:
- Prompt prices drop at the end of the week as forecasts of cooler weather dampen demand.
- Continental prices and low wind generation provided support early in the week, keeping prices high, but improved nuclear plant availability counteracted that.
- Wind picks up over the weekend as Thunderstorms bring fresher weather to the UK.
- Strength across the wider fuels complex keeps curve prices high.
- European carbon benchmark hits fresh highs keeping Winter-18 contract prices strong.
For most of last week it seemed previous trends would continue, with low wind output, strong NBP gas prices, and high continental prices propping up prompt prices. However, improved nuclear availability in the UK and France alongside forecasts of cooler weather from Friday helped to push day-ahead and prompt prices down as Thunderstorms rolled across the country. The average price for day-ahead baseload delivery during week 30 was £56.72/MWh.
The highest price for the week was £59.76/MWh; down nearly £10/MWh from the previous week’s highs. The lowest day-ahead price for the week was £50.44/MWh on Sunday 29th, as the cooler weather and higher wind output pushed the less efficient (and more expensive) CCGT plant offline.
Wind output peaked at 10.53GW on Sunday – its highest level for months – while Solar output was down from the previous week, averaging 2.09GW, although the peak on Wednesday was higher at 8.01GW.
Single imbalance prices during week 30 averaged £55.86/MWh. Although the average was similar to last week, prices across the week were significantly more volatile and several periods of negative pricing were observed over the weekend.
The week’s lowest price was for settlement period 26 (12:30-13:00) on 28th July, when the UK system switched from being undersupplied to oversupplied. With the cooler weather and higher wind output over the weekend, system prices reached -£70.45/MWh, with a number of offshore windfarms, including Greater Gabbard, along with two Humber, Lincs and London Array units being paid over £150/MWh not to generate.
The week’s highest price was £158.00/MWh, for settlement period 19 (09:30-10:00) on 27th July, after an unplanned outage at West Burton B CCGT plant. Brigg and Killingholme 2 were both paid £158/MWh by National Grid to start up.
Renewables and other
Wind output averaged just 4.08GW over the 7 days starting 23rd July, peaking at just over 10GW. Average solar output was lower than last week, but it peaked about 1GW higher on Wednesday 25th at just over 8GW.
The cooler weather, combined with lower demand and higher wind output, meant that very few coal-fired plants were generating over the weekend. Renewable output was highest on Sunday 29th when over 2GW of solar and over 10GW of wind contributed more than 40% of the UK fuel mix, reversing roles from mid-week when Solar contributed more than 20% of the fuel mix.
The UK imported electricity from interconnectors for most of the week, although exports through the Brit-Ned Interconnector did occur at various points, reflecting the strength of prices in the Dutch market.
Secure and promote* (Seasons +1, +2, +3, +4) baseload contracts changed little over the course of the week, with the front 2 seasons losing some value whilst Winter 19 and Summer 20 gained £0.40/MWh.
The UK power curve was bullish throughout the beginning of the week, but bearish towards the end of the week, as power products followed their gas counterparts. The price increases during trading on 24th July were a result of reduced Brent Crude supply expectations. This increase in power prices for the front winter season has improved the prospects for coal-fired generators by boosting their profit margins.
*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 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.
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.