Weekly Energy Report: Heat makes Day-ahead prices flip-flop
30th July 2019
Discover what happened last week in the energy market by reading Haven Power’s market report. Here’s our summary for the past 7 days, starting Monday 22nd July:
- Prompt power prices for Thursday hit weekly peak of £43.50/MWh as temperatures soared.
- Imbalance price reached £120/MWh as National Grid called on gas to balance the system.
- Seasonal contracts experienced losses over the week as carbon corrected downwards.
- Average wind output made week-on-week gains; average solar stayed steady around 1.9GW.
Read more below:
Day-ahead prices on Monday 22nd July were up due to the forecasted drop in wind output , meaning that more expensive methods of generation would be required the next day. Tuesday 23rd July saw the prompt power price finding strength off the back of the predicted lower wind output – and a forecast of high electricity demand on Wednesday 24th July. In part, this was because of increased demand for cooling and air conditioning resulting from the high temperatures experienced across Europe.
The day-ahead price on Wednesday 24th July was lifted by a low wind forecast for early the next day. Predictions that solar output would be lower compared to Tuesday and Wednesday also helped boost prices. Temperatures were forecast to reach UK all-time highs on Thursday 25th July, increasing the demand for electrically-powered cooling and helping to lift the prompt power price.
Prompt prices for Friday 26th July were down during the previous day’s trading session. This was most likely due to a decrease in power demand from cooling and air conditioning, as temperatures fell significantly from Thursday to Friday. The decrease in day-ahead prices occurred in spite of firm National Balancing Point (NBP) prompt prices and lower wind output on Friday 26th July.
Over the weekend, the day-ahead price continued to drop as temperatures fell and demand for air conditioning decreased. Lower prompt gas also helped to depress prices, as high gas storage levels and low demand continued.
The imbalance prices reached highs of £120/MWh on Thursday 25th July during settlement period 38 (18:30-19:00). The price was set by National Grid accepting offers to increase generation from Glanford Brigg Power Station.Located outside the town of Brigg in North Lincolnshire, this gas fired power station has a fast response capability.
The lowest imbalance price during week 30 was £0/MWh during settlement period 3 (01:00-01:30) of the same day: Thursday 25th July. The price was set by National Grid accepting bids to increase power consumption from Dinorwig pumped-storage hydroelectric power station. Dinorwig frequently sets the lowest system price, as it submits flat or negative bids in the balancing mechanism to consume power; either it does this at no cost, or gets paid to do it. If there’s an oversupply of power in the grid, these bids may be accepted and Dinorwig will use the power to pump water back into its reservoir.
Renewables and other
Following the high levels of wind on the evening of Sunday 21st July, wind generation started week 30 at a high level on the next morning: 11.5GW. Solar began the week with similar levels of generation to those in week 29 (peaks of around 6GW) before rising on Tuesday 23rd July to a peak of 8.3GW.
After Monday’s highs, wind production fell to 4.3GW on Tuesday 23rd July before rising again to 9.1GW early in the morning of Wednesday 24th July. Solar peaks remained above 7GW that day and into Thursday 25th July.
Wind generation continued to be variable over the rest of week 30, with output ranging between 2.1GW and 7.9GW. Average wind output was up week-on-week from 4.3GW to 5.8GW.
Solar output dropped off significantly from Friday 26th July onwards; daily peaks struggled to rise above 4.1GW. The lowest solar output in week was 3.1GW on Saturday 27th July.
Secure and promote* (Seasons +1, +2, +3, +4) baseload contracts fell by an average of £1.74/MWh over week 30.
Curve power products fell on Monday 22nd July due to several factors. One was the falling European Union Allowance (EUA) carbon prices, caused by a low Central Auction Platform outcome; auctioned EUAs were trading at a discount to the market price. Another was the weakness in National Balancing Point (NBP) gas equivalent contracts; in part, this may have been caused by the US distancing itself from the UK-Iran captured oil tanker situation. The market could have perceived this as a de-escalation of the situation, reducing the chances of oil and a gas supply disruptions. This fall in gas price occurred despite Liquefied Natural Gas (LNG) arrivals at European grids dropping to their lowest level since October 2018.
On Tuesday 23rd July, seasonal contracts saw gains as carbon jumped higher; Europe’s heatwaves and a reduction in French nuclear availability are acting as bullish drivers for the commodity. NBP gas and coal both moved up too, taking the longer-dated UK power contracts with them.
Weaker gas curve prices on Wednesday 24th and Thursday 25th July caused power curve prices to move lower and cancel their gains from Tuesday 23rd. Pressure also came from bearishness in coal and carbon.
On Friday 26th July, prices continued to fall due to weakness in the overall energy complex. However, carbon appeared to be the main factor pushing UK curve power prices down; it experienced a bearish price correction over the second half of week 30, after reaching highs of €29.81/Tonne on Tuesday 23rd July.
*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 and George Goodhew - 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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