Weekly Energy Report - Seasonal UK power prices surge
Haven Power’s market report keeps you updated on what’s happened in the energy market over the past week. Here’s what happened in the 7 days starting Monday 8th July:
- Gains across gas, oil and carbon caused seasonal UK power prices to rise £3.85/MWh on average.
- Weak wind generation helped to support day ahead power prices.
- Dinorwig pumped storage power plant set the highs and lows of the imbalance price.
- Gas fired power plants were under high demand due to weak renewable output.
Read more below:
On Monday 8th July, prompt prices found gains off a forecast of low renewable output, with wind generation peaking at just 2.5GW on the following day. The Nemo Link outage of the previous week was still in place as week 28 began, reducing the UK’s import capacity by 1GW. In addition, the 10-day planned maintenance at the Norwegian Troll gas field began causing a reduction in supply to the rest of north east Europe.
The poor wind performance continued into midweek, supporting the Day ahead baseload prices for Wednesday 10th July. However, the Day ahead baseload price for Thursday 11th July dropped, due to a stronger wind forecast compared to earlier in the week. A lower solar output forecast limited the Day ahead peak price losses.
The Day-ahead prices for Friday 12th July reached a three-week high, after a spike in the equivalent National Balancing Point (NBP) gas contract. Several unplanned gas infrastructure outages (including a UK gas terminal) and high gas demand caused the spike. UK power prices were prevented from rising further due to higher wind output.
Going into the weekend, prompt prices continued to rise off the back of a strong gas market and weak renewables forecast.
Imbalance prices reached a high of £98/MWh on Thursday 11th July during period 19 (9:00-9:30) following National Grid’s acceptance of multiple offers to increase generation. These all came from Dinorwig pumped-storage hydroelectric power station, in Snowdonia National Park in north Wales.
The system price stayed above £20/MWh throughout week 28 – except for period 39 (19:00-19:30) on Saturday 13th July, when there was a sharp drop down to £0/MWh. This zero price was set by multiple bids to increase power consumption, again originating from Dinorwig power station (which would use the power to pump water back up to its reservoir).
Renewables and other
The first half of Week 28 started with very low wind output, bottoming out at 1GW over multiple periods on Monday 8th and Tuesday 9th July. On the Monday, solar generation reached its highest peak for the week of 6.6GW; on the following day, it dropped to its lowest point of 4.3GW.
The deficit in UK power generation caused by low wind output resulted in National Grid calling on gas plants to meet the UK’s demand. As a result, gas output reached over 60% of the UK energy mix in multiple periods across week 28.
After low output during the first half of the week, wind generation ramped up over Thursday 11th and Friday 12th July and peaked at 5.6GW early on the Friday evening. While this met 15.8% of UK demand at the time, it was down significantly from the high of 12.8GW seen during week 27. On Sunday 14th July, wind generation dropped back down to midweek levels. Solar output peaks ranged between 4.4GW and 6.3GW over the rest of the week.
Secure and promote* (Seasons +1, +2, +3, +4) baseload contracts were up by an average of £3.85/MWh over week 28; a significantly higher change than in recent months.
There was bullish sentiment across the energy complex on Monday 8th July: gains in gas, carbon, coal and oil all caused upward movement across the UK power curve. On Tuesday 9th July, weaker carbon and coal prices put some pressure on the power curve, as did losses on equivalent NBP contracts.
Curve power products continued to move higher over the rest of the week. This followed the bullishness in gas caused by this month’s arrivals of Liquefied Natural Gas (LNG) into north east Europe being lower than the recent average. Carbon prices also continued to push higher, thanks to the strength in gas and the restricted supply of European Union Allowance (EUA) carbon contracts due to the market stability reserve.
*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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