News / Gas and carbon drive volatility on curve

Gas and carbon drive volatility on curve

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

Here’s a summary of the week starting 14th October:

  • Low wind generation forecasts exposed day-ahead contracts to NBP volatility.
  • Concern over no deal Brexit causes carbon sell off.
  • UK power curve sees mixed sentiment throughout the week ending on a gas driven high
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Prompt/Day-ahead Power

Week 42 saw volatility on day ahead contracts. While forecasts of low wind generation added risk premium onto prices throughout the week, NBP gas equivalent contracts were the influencers of upwards and downwards movements in price.

The week’s highest price for baseload delivery was £67.44/MWh for 15th October, as national grid revised wind generation forecasts down to 2.5GW of average generation output. This was a steep drop from the previously expected 9GW; leading to more call on fossil generation.

The lowest price for baseload power, £63.54/MWh, was for 21st October when high wind output and lower system demand was forecast. This high wind output materialised and wind peaked at over 10GW.

2018-10-23 pricingreportgraphs1

Imbalance Prices

The average imbalance price during week 42 was £63.34/MWh – a small decrease from week 41.

The lowest price of the week, £37.94/MWh, was for settlement period 8 (03:30-04:00) on 16th October.

The highest price for the week was £167.45/MWh for settlement period 34 (16:30-17:00) on 15th October. During this period, the UK system was nearly 700MW short of generation. The system operator called on CCGT generation to meet this demand.

2018-10-23 pricingreportgraphs3

Renewables and other

Average wind output during week 42 was significantly less than the previous week, at 4.5GW compared to 8.2GW. Gas and coal fired generation made up for the changes in wind output during the week.

Wind output reached over 10.2GW during the evening of 21st October, contributing 36.1% of the UK generation stack and eliminating the need for coal fired generation at the time.

Solar struggled to surpass 5GW generation throughout the week, with the average sitting at less than 1GW, however output peaked at 5.6GW on 19th October.

2018-10-23 pricingreportgraphs4

Seasonal Contracts

Secure and promote* (Seasons +1, +2, +3, +4) baseload contracts saw considerable volatility over the course of week 42, resulting in a loss by the end of the week, with season +3, summer-20 losing around £1/MWh.

UK wholesale electricity contracts saw volatility throughout week 42, tracking carbon and gas contracts. Uncertainty around Brexit and the outcomes of a no deal scenario led to large sell offs of carbon contracts which drove losses. Increased storage volumes of NBP gas, softer oil and carbon drove prompt prices down, with this value feeding through onto the curve.

2018-10-23 pricingreportgraphs2

*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 Summer 19 and Winter 19.

2018-10-23 annual-prices

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.

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.