News / Weekly Energy Report - UK power curve lacks direction

Weekly Energy Report - UK power curve lacks direction

15th January 2019

The Haven Power market report updates you on the energy market’s weekly changes. Here’s what happened in the 7 days starting 7th January:

  • UK power curve struggled for any clear direction.
  • Wind output stood at over 14GW on several days, reaching almost 50% of generation mix.
  • Imbalance price spiked as UK system flipped from long to short; pumped storage hydro used.
  • Cold weather forecasts for France influenced power curve in UK.

Prompt/Day-ahead Power

Prices for baseload power for delivery the following day were turbulent during week 2. There was a range of over £11.50/MWh between the high for delivery on 10th Jan and the low for delivery on 14th. These extremes were largely driven by expected wind output, which exceeded 14GW at both the beginning and end of the week.

Cold weather is forecast to arrive in the UK from the continent within the next 7 days (i.e. in week 3). This added some premium into near-term prompt products, reflecting the risk of extra demand and tighter supply margins.

2019-01-14 pricingreportgraphs1

Imbalance Prices

High levels of wind output throughout much of week 2 didn’t result in any periods of negative imbalance prices. The lowest price of £10/MWh was for settlement period 15 (07:00-07:30) on 11th January - a time when wind output was relatively low for the week. This low final imbalance price was the result of National Grid accepting the bid by South Humber Bank power station (a gas-fired plant) to reduce generation output.

The highest price for the week of £180/MWh was for settlement period 13 (06:00-06:30) on 10th January. At this time, the UK system shifted dramatically from being in slight excess of generation for a number of settlement periods to being short of power. National Grid took urgent action and accepted offers from a number of pumped storage hydro generators. While the final price was set by Dinorwig pumped-storage hydro, the system operator’s accepted offers from Ffestiniog and Cruachan made up the majority of the actions taken in that period.

2019-01-14 pricingreportgraphs3

Renewables and other

Wind output exceeded 14GW on a number of days during week 2, contributing close to 50% of the generation mix at times. When the wind wasn’t blowing, gas-fired generation filled in (as it always does) by ramping output up and down to match demand.

National Grid called upon pumped-storage hydro generation numerous times during week 2, making up for both sudden drops in generation output and demand spikes. The reliance on this technology isn’t surprising; it’s a fast-response, low carbon grid balancing tool that can be utilised daily. For example, at 15:53 on 8th January, pumped storage was generating 0.4GW; just 12 minutes later, it had peaked at 1.6GW - a high level of power output in a short amount of time.

2019-01-14 pricingreportgraphs4

Seasonal Contracts

Secure and promote* (Seasons +1, +2, +3, +4) baseload contracts saw average gains of just £0.17/MWh, although prices were fairly turbulent across the week and struggled to find clear direction.

Trading on 8th January saw bullish movements from the prompt and the curve, following a rise on the National Balancing Point (NBP) gas market. The prompt gas uplift came from higher demand forecasts for the following day (9th January), with these gains filtering out to the curve products. The wider fuels (oil, coal and carbon) all traded up during the 8th, providing further bullish momentum.

On 9th January itself, bearish influence from the wider fuels provided downward impetus to the power curve, before seeing further gains on 10th and 11th. The French power market is typically very sensitive to temperature, and with the UK regularly buying power from France, any forecast of cold weather makes these imports more expensive. With a colder front expected, a related risk premium was priced into the prompt and curve products on 12th January. This was strengthened further by reduced nuclear capacity in France over the short term.

2019-01-14 pricingreportgraphs2

*For more information about Secure and Promote, please consult this Ofgem web page.

Annual Power

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 Summer 19 and Winter 19.

2019-01-14 annual-prices

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, on 01473 707755 quoting reference HP250.

Disclaimer

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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