Weekly Energy Report - Minor Earthquake and Brent crude hit power curve
29th May 2019
Stay in touch with week-by-week changes in the energy market: read the Haven Power market report. Here’s our analysis of the past 7 days, starting Monday 20th May:
- Minor earthquake in Groningen region is the likely cause behind power price hike.
- High wind output sends imbalance prices negative for a sustained period.
- No place for coal-fired power production in the generation stack during week 21.
- Oil prices pressured by surging US oil stocks and trade war.
Read more below:
Prices for day-ahead power largely trended down last week, as output from renewable stations was expected to increase, and demand predicted to be lower over the bank holiday weekend. The highest price for the week was for baseload delivery on Monday 20th May, when wind generation was expected to be low; on that day and throughout week 21. Wind output was around 2GW throughout Monday 20th May, however, relatively high solar output may have contributed to keeping the price at a reasonable level (£42.32/MWh) and keeping coal out of the generation stack.
Day-ahead baseload prices trended downwards for the remainder of the week, pressured by forecasts of increased wind output, decreased demand heading into the weekend and the arrival of additional Liquified Natural Gas (LNG) cargoes pressuring National Balancing Point (NBP) day-ahead and weekend contracts.
Imbalance prices averaged just £30.96/MWh across week 21, helped by 18 consecutive periods of negative prices on Sunday 26th May when high wind generation sent the UK system long. The lowest price for the week was -£71.26/MWh. This was the final price for settlement period 31 (15:00-15:30) on Sunday 26th May. During this settlement period, actions taken by National Grid to reduce generation (or increase demand) outweighed those taken to increase generation levels, by over 1200MWh. The final price was set by an accepted bid from Arecleoch Wind Farm to reduce their output by over 50MWh during this settlement period. Other actions taken included National Grid paying Greater Gabbard and Thanet Offshore wind farms to turn down their generation.
The highest price of the week was for settlement period 36 (17:30-18:00) on Monday 20th May. The final price was set by an accepted offer from gas-fired power station, Connah’s Quay, to increase their output by 115MW. This time of the day is when industrial and domestic demand cross over, and solar output is declining. National Grid also called upon fast-response pumped-storage hydro during this settlement period.
Renewables and other
Renewable output was reasonably strong throughout week 21, with solar output peaking at over 7GW for five days in a row. At 15:00 on Thursday 23rd May, solar, complemented by wind generation, contributed almost 14GW of the generation mix, meeting almost 38% of power demand. Coal-fired generation had no place in the UK fuel mix for the whole of week 21, and has now been absent from the generation mix since settlement period 32 on Friday 17th May - a total of 224 hours.
Secure and promote* (seasons +1, +2, +3, +4) baseload contracts made small average gains over the week (seasons +2, +3, +4) all making gains, and the front season slightly losing value. The wider fuels mix was generally bearish during week 21, with Brent crude, European coal and European carbon all losing some value. This weakness had little influence over the power curve, as seasonal power contracts mirrored their gas counterparts.
Brent crude oil lost value over the week. This was due to US crude inventories being at their highest level for almost two years, weakness caused by the US-China trade war, and slower expected economic growth.
European carbon also dropped nearly 3%, with weak auction results and the pressure of declining oil prices pushing prices lower.
The biggest surprise of the week came on Wednesday 22nd May. A minor earthquake near the Dutch Groningen oil fields caused seasonal products to open at a significant premium, compared to where they’d closed the day before.
*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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