Weekly Energy Report - Renewables push gas/coal prices down
For your update on weekly changes in the energy market, read the Haven Power market report. Here’s our summary of the last 7 days, starting 11th February:
- There was increased confidence in there being only a small risk of a supply shock similar to last March.
- UK power curve fluctuated daily, with all losses wiped out during trading on Friday 15th.
- Wind output reached over 10GW while solar achieved more than 4GW on the majority of days.
- Strong renewables forced gas and coal to fall to 25% of UK generation at one point.
Day-ahead prices averaged £49.96/MWh over a week dominated by high levels of wind and solar generation.
Baseload power for delivery on 11th February achieved the highest price for the week at £57.14/MWh. This was due to low levels of wind (around 2GW) at peak times, resulting in the systems operator bringing more expensive gas generation onto the system to cover demand.
The week’s lowest price (£46.87/MWh) was for day-ahead baseload power delivery on 17th February. Wind output peaked at 13.1GW and the temperatures - around 9.3 degrees Celsius - were warmer than during the rest of the week.
During week 7, settlement period 16 (07:30 – 08:00) on 11th February had the highest imbalance price: £145/MWh. As the working day began, demand was increasing sharply and wind generation was diminishing. This made the balancing actions available to the system operator - including a ramp-up of pumped storage by 1GW until gas generation could match demand - typically more expensive. The final price was set when National Grid accepted an offer from Glanford Brigg Power Station (which primarily burns natural gas) to increase generation.
Settlement period 46 (22:30 – 23:00) on 15th February held the lowest imbalance price of £10.50/MWh of week 7. This was due to continually high levels of wind (around 10.6GW) throughout the night, as demand rapidly decreased, forcing the more expensive gas and coal to fall to 25% of UK generation.
Renewables and other
Week 7 was a particularly strong week for renewable generation in the UK, with wind output reaching over 10GW and solar over 4GW on most days. Wind peaked at over 13GW on 17th February, contributing almost 40% of the UK generation mix (operating at 62.8% load factor) while solar was close to 16% when it peaked at 6.3GW on the 15th.
This day’s high wind and solar output caused gas to fall to 10.4GW - 26.5% of the UK generation mix - during peak hours. This highlights how much renewables can actually produce and emphasises how they help to remove the more expensive and less environmentally-friendly means of generation from the system.
Secure and promote* (Seasons +1, +2, +3, +4) baseload contracts gained on average £0.16/MWh over week 7, putting a slight dent into the recent downward trend in prices that the market has experienced recently.
Power prices on Monday morning opened around £0.70/MWh lower than Friday’s closing price, as they tracked continuing losses in the European Union Allowances (EUA) carbon market. Tuesday saw the bearish pressure on the power curve continue, as the wider fuels mix moved downwards. This included losses in the National Balancing Point (NBP) gas curve, the Brent Crude Oil benchmark and European carbon market. Wednesday saw an end to the curve’s continuing losses, with both gas and oil prices changing direction and gaining value. The rest of the week saw the power price keep rising, with Thursday’s losses wiped out again during Friday’s session of trading by an increase in the price of the wider fuel mix.
*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 Summer 19 and Winter 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 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.