Weekly Energy Report - Imbalance price: first negative in July
23rd July 2019
Get Haven Power’s market report for your weekly update on what’s just happened in the energy market. Here’s our summary of events over the past 7 days, starting Monday 15th July:
- The system price reached lows of -£65.93/MWh on Wednesday 17th – July’s first negative.
- Prompt power prices experienced day on day losses, as wind increased and the gas prompt fell.
- Seasonal power contracts were down after weakness in National Balancing Point gas and carbon.
- Wind generation ramped up from monthly lows to above 10GW.
Read more below:
On Monday 15th July, prompt prices for the following day rallied to a high of £48.8/MWh. In part, this bullish upturn was due to the strength of the National Balancing Point (NBP) gas Day-ahead market. An unplanned outage on the Aasta Hosteen gas field in Norway was partly the cause. Forecasts for low wind output, plus a level of electricity demand above the seasonal average, helped to support the day-ahead power price.
On Tuesday 16th July, Day-ahead prices fell as they followed a drop in the NBP gas equivalent contract. In addition, predictions for a big increase in wind output on Wednesday 17th July put pressure on the prompt power price. This pressure comes because day on day increases in wind output forecasts tend to push the more expensive Combined Cycle Gas Turbine (CCGT) power plants out of the energy mix. The losses on Day-ahead prices continued on Wednesday 17th and into Thursday 18th July, as weakness in the NBP prompt persisted due to high short-term gas supplies.
The day-ahead price dropped further on Friday 19th July, as wind forecasts were predicted to rise further over the weekend. Although there was some upward movement on the NBP Day-head price, it wasn’t significant enough to counteract the effects of the high wind forecast.
The highest imbalance price of the week (£85/MWh) occurred during settlement period 18 (08:30-09:00) on Friday 19th July. The price was set by offers to increase generation from Spalding Power Station, an 860 MW capacity gas fired plant in Lincolnshire.
The system price went negative on Wednesday 17th July over periods 22 and 23 (10:30-11:30), with the lowest price being -£65.93/MWh. Set by bids to decrease generation from Ewe Hill Windfarm in Scotland, this was the first time since Sunday 30th June that the imbalance price has entered negative territory.
Renewables and other
The beginning of week 29 saw the previous week’s poor levels of wind generation continue; they sank to a low of 680MW on the night of Monday 15th July. This low output continued into Tuesday 16th July before picking up and reaching 7.7GW on the afternoon of Wednesday 17th July. Over the rest of the week, wind power was variable, but average generation gradually ramped up. It reached 10.1GW on Saturday afternoon (20th July) and achieved its weekly high of 10.3GW in the late evening of Sunday 21st July. At that time, it accounted for 44.8% of the UK’s demand.
Solar started week 29 with strong levels of generation, reaching its highest peak of 7.05GW on Tuesday 16th July. It then dropped before falling to its lowest peak of 2.5GW on Friday 19th July, before remaining between 5-6GW over the weekend.
Wind output averaged 4.33GW over week 29, up significantly from the 2.63GW seen during week 28. The average solar generation for week 29 was in line with the previous week, as both averaged around 1.9GW.
Secure and promote* (Seasons +1, +2, +3, +4) baseload contracts fell by an average of £2.39/MWh over week 29.
On Monday 15th July, power prices rose during the morning before falling later in the trading session. The decline occurred as National Balancing Point (NBP) gas curve contracts and European Union Allowances (EUA) carbon both suffered losses. The UK power curve saw further losses the next day (Tuesday 16th July) as prices on NBP gas, EUA carbon and API2 Rotterdam Coal Futures all went down.
After a bearish start to the trading session for seasonal contracts on Wednesday 17th July, they realised small gains on the day overall when the carbon, coal and NBP gas curve contracts enjoyed a late upsurge. On Thursday 18th July, curve products experienced losses off the back of a carbon price continuing to fall from its all-time high at the start of the week. In addition, the NBP equivalent contract fell on the day, putting pressure on secure and promote contracts (a weakness that materialised despite the strength seen in Brent Crude oil).
At the end of the week, the UK power curve products made some gains due to several factors. Carbon prices jumped upwards, regaining much of the value lost over week 29, and coal prices also continued to move up until reaching levels last seen on 17th May. In addition, Brent crude oil surged on Friday 19th July following Iran’s seizure of two oil tankers in the Strait of Hormuz. Any further escalation of this situation has the potential to disrupt the global supply of oil and push prices higher.
*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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