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Strong wind and solar output buoys renewables, as oil prices hit 4-year high

The Haven Power market report: keeping you up to date with energy market changes over the last 7 days.

Here’s a summary of the week starting 30th April:

  • Reports of tensions between the US and Iran send Brent Crude oil prices to 4-year high
  • Warm weather over the bank holiday weekend keeps demand low and day-ahead prices down
  • Seasonal contracts move in line with wider fuel commodities
  • Coal absent from fuel mix for a full 24 hours again during week 18

Prompt/Day-ahead Power

Week 18 saw prompt prices staying fairly strong, despite high wind and solar output for long periods of the week and the bank holiday weekend. The average day-ahead price was around £9/MWh more than in the same week of 2017.

Day-ahead power prices peaked at £53.45/MWh for delivery on 3rd May, when renewable output was expected to be lower. Prices for delivery on 6th May, during the bank holiday weekend, were the lowest for the week at £49.73 MWh, although output from wind was low. This was probably due to the influence of temperature over day-ahead gas products, which then had a knock-on effect to power prices. Although wind output was low on 6th May, very little expensive coal-fired generation was required to fill this gap because of low demand.

Imbalance Prices

Single imbalance prices during week 18 averaged £44.07/MWh, with some periods spiking over £100/MWh while many other periods featured negative pricing.

The price for settlement period 16 (07:30-08:00) on 1st May was the week’s highest at £138.50/MWh, while the UK system was short of generation. During this settlement period, National Grid paid a number of Combined Cycle Gas Turbine (CCGT) plants to generate and ease system stress; it also called upon Fiddlers Ferry coal plant at a price of £80.00/MWh.

The week’s lowest price of -£75.01/MWh was during settlement period 17 (08:00-08:30) on 4th May, when the UK system had excess generation of 676MWh. This led the system operator, National Grid, to take action to better balance the system, including paying Edinbane, Kilbraur, Farr and Beinn Tharsuinn wind sites to reduce their generation.

Renewables and other

Renewable output, particularly wind, varied during week 18. The high wind output at the beginning of the week subsided and made way for clear conditions, with high solar output, during the second half.

Solar output was high during week 18, peaking at almost 9GW on 6th May, as the UK enjoyed a very atypical sunny bank holiday weekend. Low demand, partly thanks to the weekend’s high solar output, kept coal-fired generation out of the UK fuel mix for the whole of 5th May. However, coal was present in the generation stack for the remainder of the week, as wind output fell.

Brent Crude oil prices continued their recent upward trajectory during week 18, hitting a 4-year high as tensions rose between the US and Iran around the nuclear deal.

Seasonal Contracts

Secure and Promote* (Seasons +1, +2, +3, +4) baseload contracts all made modest gains during week 18, with the Winter products showing the larger increases of £0.35/MWh.

Although prices were up when comparing Monday’s market opening to Friday’s close, this doesn’t tell the whole story. Seasonal products were dropping, with losses in value for gas, coal and carbon products on Tuesday 1st and Wednesday 2nd. Electricity prices ticked up again on Thursday and Friday, as these same products all regained the ground they’d lost earlier in the week. The European gas market was a significant driver too, as gas storage levels in Germany and France are currently tight and much of the Liquefied Natural Gas (LNG) is heading to those countries to replenish stocks.

*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 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 blog.

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, 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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