Weekly Energy Report - Imbalance price reaches 15-month high
2nd July 2019
For your update on what’s happened in the energy market over the past week, get Haven Power’s market report. Here’s our summary for the past 7 days, starting Monday 24th June:
- Imbalance price of £375/MWh maintained for 1½ hours on Monday 24th June.
- Renewables reached a peak of 64.5% of the UK energy mix on Sunday 30th June.
- After a short-lived rally, prompt prices dropped due to high renewables output and low gas price.
- Weak carbon and gas prices encouraged overall losses for secure and promote prices.
Read more below:
On Monday 24th June, the UK prompt price experienced its largest day-on-day increase of this year (£38/MWh to £47.20/MWh). This was because of forecasts that supply could fall short of demand on Tuesday, mainly due to lower renewables output than previously predicted.
Following this price spike, prompt prices dropped back down in midweek as a result of falling demand forecasts and increases in wind and solar generation. The continuing high levels of gas supply were also a factor in putting pressure on UK prompt power prices, as further Liquefied Natural Gas (LNG) vessels were due to arrive at UK terminals.
At the end of the week, the losses on the day-ahead contract continued as renewables output increased. In addition, the maintenance of the IFA (Interconnexion France-Angleterre; or France-UK Interconnector) came to an end on Friday 28th June, and some nuclear capacity returned to the grid.
The imbalance price reached a 15-month high of £375/MWh between settlement periods 23 and 25 (11:00 - 12:30) on Monday 24th June. The last time imbalance prices were above £300/MWh was in March 2018, during the ‘Beast from the East’ cold snap. There were three key reasons for Monday’s high price: a dip in wind output; planned outages in the UK’s nuclear plants; and limited interconnector capacity with France. These factors squeezed the UK’s power supply and allowed coal back into play to balance the system. The high price was set as National Grid accepted offers from the coal-fired Ratcliffe-on-Soar Power Station.
The lowest imbalance price of the week (£0/MWh) was seen was on Tuesday 25th June during settlement period 17 (8:00-8:30). This price was set by accepted bids from Dinorwig pumped storage hydroelectric power station to increase consumption.
Renewables and other
The start of the week had low outputs for both wind and solar. The former hit its lowest point (just 1.7GW) on the evening of Monday 24th June – equivalent to 5.4% of the UK’s demand at the time. Solar’s weekly low (3.1GW) came on the afternoon of Tuesday 25th June; it reached its weekly high of 8.9GW on the afternoon of Thursday 27th June.
Wind generation increased steadily over the week and this, combined with the increasing solar output, contributed to driving down prompt prices. This helped reduce the proportion of more expensive methods of generation in the UK’s fuel mix, such as Combined Cycle Gast Turbine (CCGT) gas plants. Wind output peaked on the afternoon of Sunday 30th June at 11.4GW, coinciding with the overall renewables peak of 19.8GW. So, at that point, renewables (wind, solar, biomass and hydro) were satisfying 64.5% of the UK’s demand.
Secure and promote* (Seasons +1, +2, +3, +4) baseload contracts fell £0.28/MWh on average during week 26.
On Monday 24th June, there was strength across all secure and promote contracts, reflecting a surge in prompt prices and the gains seen in both carbon and coal futures. However, high levels of Liquefied Natural Gas (LNG) supply put pressure on European gas prices and limited gains on the shorter-dated curve power contracts.
After a dip on Tuesday 25th June due to lower gas and coal prices, these contracts recovered their losses on Wednesday 26th June; strength in carbon and oil drove gains. We saw the Win-19 spark spread reach its highest level since 2nd January 2019, as power prices rose more than gas.
Towards the end of the week, curve prices fell as support for carbon faded. The prices of these contracts were also weighed on by downward pressure (bearishness) in the gas market caused by the prospect of more LNG deliveries to the UK in the coming months.
*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, 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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