Weekly Energy Report - High winds, low gas pressure day-ahead
5th November 2019
Haven Power’s market report updates you on what’s happened in the energy market over the past week. Here’s our summary for the past 7 days (week 44), starting on Monday 28 October:
- N2EX day-ahead auction price dropped to a three-week low.
- National Balancing Point (NBP) day-ahead price fell as gas imports ramped up.
- European Union Allowances (EUA) carbon prices rallied in reaction to the Brexit extension.
- Secure and promote contract prices finished the week largely constant, despite mixed movement in energy complex prices.
A combination of falling wind output and rising National Balancing Point (NBP) prompt prices supported day-ahead power for delivery on Monday 28 October. The N2EX day-ahead auction moved up 11.6% compared to the previous day of trading (Friday 25 October), and the NBP day-ahead rose by 4.6% day-on-day. This latter movement was due to the drop in average noon temperatures from 11.2 °C on Friday 25 October to 8.8 °C on Monday 28 October. This prompted a 28% increase in gas consumption for heating at the local distribution zone (LDZ) level.
Day-ahead power prices for Tuesday 29 October were driven lower by a 52% jump in wind generation and almost a 4% fall in the NBP gas day-ahead price. This reversal of movement in the NBP price was the result of lower-than-predicted consumption, due to a warmer temperature forecast for the coming week.
Prompt power prices for delivery on Wednesday 30 October continued to slide lower as there was a 33.8% increase in wind production, and further losses on the NBP day-ahead. However, there was an increase in power demand on the grid which helped to limit losses seen on the day-ahead price.
Wind increased by 4.4% on Thursday 31 October, continuing the day-on-day increases in output seen since the beginning of the week. The NBP day-ahead fell by 2.8p/Therm over the course of the day, closing at 23.1p/Therm – the lowest closing price since 10 October. These factors caused the N2EX day-ahead auction to move down 1.2%.
Prompt power prices moved lower still the next day, with the N2EX day-ahead auction falling from £37.77/MWh for Thursday 31 October to £32.81/MWh for Friday 1 November. This is the lowest N2EX auction outturn for a weekday since 11 October. Having lost value over the previous three days, the NBP day-ahead closed flat on the day – one factor was the increase in supply to UK gas terminals. The daily average gas imports increased from 115 million cubic meters (mcm) in week 43 to 129 mcm in week 44.
All imbalance prices were positive this week, with the highest price occurring over settlement periods 18 and 19 (08:00 – 09:00) on Monday 28 October. The price was set at £85/MWh by an offer to increase generation from a single Balancing Mechanism (BM) unit: Rye House Power Station. This is a 715MW Combined Cycle Gas Turbine (CCGT) plant in Hertfordshire, England.
The lowest price of the week was reached during settlement period 3 (01:00 – 1:30) on Thursday 1 November. The price was set at £5/MWh from a bid to reduce generation from Saltend Power Station. This CCGT plant on the Humber estuary, East Yorkshire, England has 1.2GW of capacity.
Renewables and other
Over the first four days of week 44, wind generation ramped up steadily. It moved from daily average lows of 3.6GW on Monday 28 October up to 7.65GW on Thursday 31, and higher still on Saturday 2 November with an average of 9.1GW. Peak wind output occurred during the early hours of Saturday morning, when the highs of 11.45GW made up over 43% of the UK power mix. Wind generation then fell off sharply, averaging 5.45GW on Sunday 3 November.
The highest level of solar generation in week 44 (4.3GW) was on Monday 28 October. It then trended down over the rest of the week, hitting its lowest point (850MW) on Friday 1 November.
The weekly average wind output fell from 7.55GW in week 43 to 6.65GW in week 44. Weekly solar averages fell marginally from 640MW to 600MW over the same period. Coal increased its share of the UK power mix, rising from 1% to 1.35% week-on-week.
Over week 44, secure and promote* (Seasons +1, +2, +3, +4) baseload contract prices increased by an average of £0.08/MWh.
There was mixed movement on the power curve over Monday 28 October. The falling prices seen on shorter-dated contracts can be attributed to the losses on equivalent NBP contracts. These were caused by: an increase in flows to UK gas terminals from Norway; milder temperature forecasts; a predicted high level of Liquefied Natural Gas (LNG) vessels arriving in the UK. Further out on the curve, on longer-dated contracts, many maturities realised gains due to a rallying carbon price.
Prices on the near curve lost value again on Tuesday 29 October, following losses on NBP equivalent contracts. The Nov-19 NBP price fell by 3.4%, as predictions of high LNG supply and mild temperatures piled on the pressure once more. Gains on EUA carbon (by 1.3% day-on-day) limited the losses further out on the curve.
Secure and promote product prices decreased on Wednesday 30 October, as the effect of bearish (falling) gas prices outweighed the bullishness (rising price trend) in carbon seen over the start of the week. This increase was due, in part, to the EU’s agreement to a Brexit extension (to 31 January, from the previously arranged 31 October). This means that the UK will remain as part of the EU’s Emissions Trading System (ETS) for the delivery of the Dec-19 carbon contract. Consequently, there’ll still be demand for these contracts from UK businesses until that time, which will help to support the Dec-19 price.
Movement on the power curve was mixed on Thursday 31 October, as longer-dated contracts (Winter-20 onwards) lost value. These contracts were pressured by bearishness in carbon, with the Dec-19 contract falling by 1.5% compared to the previous day’s close.
By the close of the markets on Friday 1 November, rising prices in energy complex constituents – NBP gas equivalent plus coal and oil contracts – strengthened the curve. Front month Brent crude made the most pronounced increases, rising by 3.8% on the day. Carbon was the only energy complex component to lose value on the day, and this limited the gains on the power curve.
*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, 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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