Sun’s out, coal’s out - for record period
12th July 2018
The Haven Power market report: your update on energy market changes over the last 7 days.
Here’s a summary of the week starting 16th April:
- High renewable output keeps coal out of UK fuel mix for new record of 55 hours, and quells day-ahead prices.
- Excess generation on the system means National Grid pays Scottish wind farms to turn off.
- Unseasonal conditions create solar output peak at over 8GW for three consecutive days.
- Rising oil prices provide support for gas and power contracts.
Reacting to levels of expected wind output during week 16, prices for day-ahead baseload power were at their highest when wind output was at its lowest.
The week’s highest price of £51.41/MWh was for delivery on Monday 16th. On this day, wind output was 6-7GW until around noon before then climbing. Prices were at their lowest on Tuesday 17th, when over 12GW of wind generation was contributing to the UK fuel mix. This high wind output kept the day-ahead baseload price down at £47.58/MWh. Prices then climbed back up to around £50/MWh for delivery on Thursday 19th to Saturday 21st, as the forecast was for dramatically reduced wind output. High solar output went some way to preventing day-ahead prices from any significant spikes when wind output was low.
Single imbalance prices during week 16 averaged £42.25/MWh, almost £20/MWh down on the previous week.
The price for settlement period 38 (18:30-19:00) on 19th April was the week’s highest, at £112.56/MWh. During this period, the UK system was short of generation so the System Operator had to re-balance through a number of actions. The most expensive, at a cost of £185/MWh, involved National Grid paying Dinorwig pumped storage hydro to provide additional generation. Other generators, including Immingham Combined Heat and Power (CHP) Combined Cycle Gas Turbine (CCGT) plant were paid in excess of £100/MWh to ease system imbalance.
The week’s lowest price of £7.93/MWh was for settlement period 33 (16:00-16:30) on 16th April. During this time, the UK system had too much generation – meaning National Grid sought to better match supply and demand. It paid a number of large wind farms to either reduce the output of their turbines, or switch off completely. The former action included paying £69.12/MWh to Clyde North wind farm and £68.35/MWh to Harestones. The price for turning off wind farms is set by the subsidy rate these sites would receive if generating. The majority of the wind farms that National Grid paid to turn off are in Scotland, probably indicating there was too much generation there. Since a number of CCGT sites paid National Grid to not generate – saving on fuel in the process – the system price was prevented from turning negative during this period.
Renewables and other
Renewable output was high during week 16; this was due to increased wind generation or, on days when wind output was low, elevated solar generation.
Wind output was high during the early part of the working week, peaking at over 12GW on Tuesday 17th. Solar output reached almost 9GW on 19th April, as summer-like temperatures arrived in the UK – leading to wind generation of just 1GW on 21st August.
Renewable output was so great during week 16 that no coal-fired generation occurred for a record 55 hours: all of the 17th and 18th, plus part of the 19th April. The system finally called upon coal during the early hours of 19th April, as wind generation fell to below 6GW for the first time in the week. The UK’s previous coal-free day, in April 2017, was its first since the industrial revolution.
Secure and Promote* (Season +1, +2, +3, +4) baseload contracts experienced mixed movements during week 16, with season +1 and +4 suffering losses, and seasons +2 and +3 seeing minimal gains.
The Brent Crude Oil benchmark showed strong gains last week, with production cuts being a key driver. Some of this bullishness fed through to National Balancing Point (NBP) gas prices on Wednesday and, in turn, power prices. Although NBP gas prices finished the week higher than where they opened, Carbon prices showed a decline in value. It’s possible that this decline offset some of the premium that rising gas prices would have placed upon power contracts. Stronger trading on coal, oil, gas and Carbon on Thursday all supported Wednesday’s power contract gains.
*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 blogs.
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.