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Wholesale prices still rising as economic sanctions loom

Stay updated on energy market changes over the last 7 days with Haven Power’s market report.

Here’s a summary of the week starting 7th May:

  • Oil, gas, coal and carbon all contributed to rising wholesale electricity prices
  • Seasons +1, +2 and +3 all made gains of about £2/MWh in a bullish week of trading
  • High solar output made up for dwindling wind output over much of the week
  • Brent Crude oil prices surged thanks to US-imposed sanctions on Iran looming

 

Prompt/Day-ahead Power

Week 19 again saw prompt prices staying fairly strong: prices for baseload delivery out-turned at over £50/MWh every day last week.

Day-ahead power prices peaked at £53.11/MWh for delivery on Thursday 10th May, when increased Combined Cycle Gas Turbine (CCGT) output compensated for low wind generation. Over the course of the day, wind output averaged little over 4GW. Prices for delivery on Bank Holiday Monday (7th May) were the lowest for the week; although renewable output was not particularly high on this day, national demand was low.

Imbalance Prices

Single imbalance prices during week 19 averaged £45.48/WMh, with no periods of negative pricing and some price spikes of over £100/MWh.

The highest price of £138.50/MWh was for settlement period 38 (18:30-19:00) on 12th May – coincidentally, it’s the same value as the highest price from week 18. During week 19, National Grid paid this amount to Killingholme 2 CCGT plant to increase generation and ease system stress; the plant did so by contributing 122/MWh. National Grid also paid a number of smaller (or ‘embedded’) generators to increase their output, although the volumes they contributed were much smaller than Killingholme’s. This ensured that the cost of paying Killingholme 2 set the final price.

The week’s lowest price of £10.00/MWh was during settlement period 5 (02:00-02:30) on 13th May, when the UK system was greatly oversupplied. National Grid corrected this by selling power back to a number of generators, which allowed them to reduce output.

Renewables and other

Solar output peaked higher than wind output on most days in week 19, with high winds on 11th May pushing down day-ahead prices.

Solar output peaked at 8.6GW on 7th May, as the UK enjoyed the warmest early May bank holiday on record. This output was great enough to keep coal-fired generation out of the UK fuel mix during the peak of the day, although extremely low output outside of this period meant coal was required.

Seasonal Contracts

Secure and Promote* (Seasons +1, +2, +3, +4) baseload contracts all made fairly significant gains during week 19, with contracts gaining almost £2 across the board.

The bullishness of the Brent Crude oil benchmark heavily influenced the UK electricity curve this week, with the National Balancing Point (NBP) gas curve following suit and dragging up power prices. Brent Crude oil was trading at 3.5-year highs towards the end of the week, as the US sanctions on Iran looked set to limit the latter’s oil exports. The European carbon market also strengthened and hit its highest point for several years.

The direction of the Winter-18 contract appeared to be heavily linked to the rising coal price. Coal looks likely to play a significant part in the UK generation mix during the coming winter period.

*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 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, 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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