Libyan exports put an end to oil’s “bull run”
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Here’s a summary of the week starting 9th July:
- Libyan oil exports were bearing down on previously high (bullish) power prices
- Low wind and high solar output continued for another week
- National Grid wasn’t stressed during England’s World Cup semi-final match
- Baseload contracts tracked movements in wider fuel commodities
Day-ahead prices were up again, on average, during week 28 as low wind output continued for another week and supported prompt power prices.
Prices were at their lowest (£55.39/MWh) for baseload delivery on Tuesday 10th July – when wind output levels were almost 3 times higher than they’d been on 9th July (although still at a relatively low level of around 3GW). Day-ahead prices rose again, as forecasters predicted both low wind output over the rest of the working week followed by an increase over the weekend days. This latter forecast saw day-ahead prices falling again.
Single imbalance prices during week 28 averaged £58.38/MWh, with no periods of negative pricing. The minimum price was £36.20/MWh, considerably higher than in recent weeks.
The week’s lowest price was for settlement period 19 (09:00-09:30) on 15th July, when the UK system was oversupplied. However, this excess wasn’t as great as we’ve seen recently when there have been high levels of wind generation. Numerous gas-fired power stations paid National Grid to take themselves out of the UK generation mix. Peterhead gas-fired power station reduced its generation by the largest amount (395MWh) during this settlement period, paying £22.50/MWh for the privilege.
The week’s highest final price was £112.98/MWh, for settlement period 34 (16:30-17:00) on 13th July, when the UK system was deemed to be short of generation. Dinorwig pumped storage hydro provided generation at the highest cost (£185/MWh), although others generated more. Rye House Combined Cycle Gas Turbine (CCGT) reduced generation output by over 200MWh, at prices between £94.50/MWh and £115/MWh. Corby CCGT was another significant contributor, reducing output by almost 100MWh at a cost of £109/MWh.
There were no significant price increases during England’s World Cup semi-final defeat to Croatia, suggesting National Grid prepared well for the 1400MW demand pick-up that occurred.
Renewables and other
It was another week, but much the same story for wind and solar generation, with low wind output over the 7 days and solar output peaking in excess of 7GW on several days.
Wind, solar and biomass generation contributed over 37% (12GW) to the UK fuel mix on 14th July. As often happens when wind output is low, gas-fired generation picked up the slack, with some coal-fired generation also making its way into the fuel mix at peak times.
Secure and promote* (Seasons +1, +2, +3, +4) baseload contracts experienced mixed movements during week 28, with the majority of products finishing the period at a lower price than when the market opened.
Rising oil prices on Monday fed through to gas and power contracts, with some support also coming from coal and carbon. These gains continued on Tuesday morning, although contracts closed the day down overall, following losses on the National Balancing Point (NBP) gas curve. Bearish behaviour across the wider fuels complex on Thursday forced the UK power curve down, with further downward pressure coming from losses on the coal and carbon markets. The Brent Crude oil benchmark lost significant value on Thursday, following the news that four key Libyan export terminals had re-opened. While they’d been closed, the loss of 800,000 barrels a day of exports from Libya had gone some way to boosting the oil price.
*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.