The Haven Power market report: your weekly update on energy market changes over the last 7 days.
Here’s a summary of the week starting 23rd April:
• High levels of renewable output kept coal-fired generation out of the mix again.
• Day-ahead prices followed wind output levels up and down.
• Excess generation resulted in National Grid paying generators to reduce their output.
• National Balancing Point (NBP) for gas was the main driver for UK seasonal contracts.
• Brent Crude oil benchmark reached a 3.5-year high.
In similar fashion to previous weeks, day-ahead prices in week 17 were strongly linked to expectations about wind output. Prices for day-ahead baseload delivery were at their highest (£56.56/MWh) for delivery on Friday 27th, when wind output was very low (under 2GW). This was the highest price since mid-March 2018 because more expensive coal-fired generation was called upon – particularly across the peak of the day – to meet demand. The week’s lowest price (£47.13/MWh) was for delivery on Monday 23rd April, coinciding with a forecast of high wind output. Actual output was above 9GW across the day, meaning that more expensive forms of generation were not required, keeping the day-ahead price down.
Single imbalance prices during week 17 averaged £46.27/MWh, with several spikes above £100/MWh and a period of negative pricing all included.
The price for settlement period 34 (16:30-17:00) on 29th April was the week’s highest at £119.16/MWh, while the UK system was short of generation. The System Operator, National Grid, called upon numerous Combined Cycle Gast Turbine (CCGT) generators, as well as pumped storage hydro, to make up for the shortfall in generation.
The week’s lowest price of -£92.38/MWh was during settlement period 31 (15:00-15:30) on 26th April. During this period, a slight dip in demand took the UK electricity system long – meaning there was excess generation (of over 1000MWh). To balance the system, National Grid paid Humber Gateway offshore wind £153.15/MWh to reduce generation, while Drax Unit 3 received £150/MWh to reduce output. A number of CCGT generators took the opportunity to pay National Grid to not generate, and save on gas costs in the process.
Renewable output was mixed during week 17, with high output between Monday and Thursday that then reduced on Friday and across the weekend.
Wind output was high during the early part of the working week, peaking at almost 12GW on the evening of 23rd April. At this time, it made up over 1/3 of the UK generation mix. However, wind output fell throughout Tuesday 24th before picking up again and reaching almost 12GW on Thursday 26th. That day’s high winds were accompanied by almost 7GW of solar output, meaning renewables were contributing almost 50% of the total generation at that time.
Wind generation on Monday 23rd and Wednesday 25th kept coal-fired generation out of the UK fuel mix for 24 hours. A small amount of coal-fired generation was needed to meet the afternoon and evening peak demand periods on 24th and 26th. Coal was present in the UK generation mix on Friday 27th, and for most of the weekend too, as wind output levels dropped off.
Secure and Promote* (Seasons +1, +2, +3, +4) baseload contracts all gained over the course of week 17, with the front season, Winter-18, experiencing the largest gains of £1.30/MWh.
Although prices over the week were generally bullish, seasonal products experienced slight losses on Tuesday after the National Balancing Point (NBP) natural gas price lost value. NBP gains on Wednesday added value to the seasonal power contracts and this theme continued for the rest of the trading week. Additional upward influence came from strong Brent Crude oil prices on Thursday, which hit a 3.5-year high. Friday saw the very front of the UK power curve increase in value, with higher demand expected over the coming days. This was because temperatures below seasonal norms were expected; this additional risk, along with strengthening coal prices, boosted the seasonal contracts.
*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.
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