Weekly Energy Report - Wind generation fluctuates
4th December 2018
The Haven Power market report is your weekly update on the UK energy market. Here’s a summary of the last 7 days, starting 26th November:
- Grid turned down Scottish wind farms to balance UK system.
- Wind generation saw large swings, pushing gas out of the generation stack.
- Wind contributed up to 45% of the generation mix on 29th November.
- UK power curve strengthened despite seemingly healthy gas supply.
The forecasted wind output heavily influenced prices for day-ahead baseload power during week 48. The high prices for delivery on Monday 26th were followed by a dramatic reduction, as wind output was expected to be significantly higher on Tuesday 27th.
The highest price for the week was for delivery on 27th, when wind output throughout the day averaged just over the predicted 2.6GW. By the time peak demand occurred at 17:30, there was just 1.8GW of wind in the UK generation stack. This lack of wind meant that output from gas-fired generation averaged 19GW, peaking at over 24GW. Coal-fired generation also made up a significant proportion of the fuel mix, heaping further premium into the power price for the day.
Compared to this low point, wind played a more significant part in the UK generation mix during the rest of the week and this pressured prompt prices. The lowest price of the week was for baseload delivery on 30th November, when wind output averaged over 12.5GW and gas output was reduced to 8.9GW across the day.
A lack of wind output at the start of the week led to several settlement periods having a final price over £100/MWh. This was because the system operator had to call upon more expensive generation to balance the system.
The highest price for the week was for settlement period 35 (17:00-17:30) on 26th November, when National Grid accepted an offer of £191.37/MWh for 250MWh of volume. The UK system had been short of generation for most of the day, and all the offers to increase generation output that the systems operator accepted were over £100/MWh. The lowest price for the week of -£5/MWh was for settlement period 1 (00:00-00:30) on 30th November, when wind output made up 44% of the total generation stack. At this time, the UK system was long - meaning too much generated power existed. National Grid paid numerous wind farms in Scotland to reduce generation output, as there was a lack of demand north of Hadrian’s Wall. The final price was set when Foyers Power Station, a pumped storage hydro plant, had its bid to reduce output or consume power accepted.
Renewables and other
Output from wind installations was just 1.9GW at noon on 26th November. However, a rapid increase during the early hours of the following day meant that it had reached 12.6GW at noon.
Wind’s contributions to the generation stack ranged from just 3.4% on 26th to 45.2% during the early hours of 29th November. Even when peak demand occurred at 17:30 on 29th, wind was still contributing over 31% of the generation mix (which was more than gas was contributing). The renewables total - covering wind, biomass and hydro generation - was contributing 39.2%, marginally more than gas and coal-fired generation combined.
During a mixed week of trading, secure and promote* (Seasons +1, +2, +3, +4) baseload contracts closed the week around £0.90/MWh above where they’d opened on 26th November.
The most notable gains came during trading on Tuesday 27th, when the front two seasonal contracts saw a rise of over £1/MWh each. The gains on the power and gas curves came despite weakness across the wider energy complex. Power products followed their gas counterparts up, despite seemingly healthy supply in the UK gas market and additional Liquefied Natural Gas (LNG) arrivals expected next week.
This upward trend softened during trading on Friday 30th November, drawing on weakness across the National Balancing Point (NBP) gas market. Sentiment was less bearish on the power curve than the gas, increasing the margin (or spread) associated with electricity generated from gas (which accounts for the majority of UK electricity). The decline of the Brent Crude Oil benchmark and the front of the NBP market were the likely drivers dragging both gas and power curves lower.
*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, 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.
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