News / Naval collision impacts prompt and curve prices

Naval collision impacts prompt and curve prices

To stay updated on energy market changes each week, read Haven Power’s market report. Here’s a summary of the last 7 days, starting 5th November:

  • Uncertainties around Norwegian naval incident influenced both seasonal and prompt prices.
  • Wind forecasts steered the prompt market.
  • High levels of renewable output pushed fossil fuels out of the UK generation stack.
  • Rising European carbon and coal prices mid-week also pushed up seasonal contracts.
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Prompt/Day-ahead Power

Week 45 echoed previous weeks, as wind forecasts once again pushed prices for day-ahead baseload delivery up and down. Gas outages and stronger demand forecasts also influenced these movements.

The week’s highest price of £60.75/MWh was for baseload delivery on Monday 5th November. The forecast for wind output had been relatively low for the time of year, hovering around 5GW across the day. However, forecasters expected it to soar during 6th November, causing a weaker gas price; the electricity price duly crashed to a week-long low of £57.17/MWh.

Following a naval incident off the west coast of Norway in the early hours of 8th November, Norwegian gas production was cut by around a third. The uncertainty around the severity and duration of the incident meant that the National Balancing Point (NBP) prompt and curve products rose in price. However, gas production restarted that same afternoon, so the uncertainty was as short-lived as the price hike. In addition, the forecast for strong wind output on 9th November further offset the bullish day-ahead gas price.

2018-11-12 pricingreportgraphs1

Imbalance Prices

The average price of balancing actions taken by National Grid during week 45 was £61.55/MWh, a reduction of over £2/MWh compared to the previous week.

On 9th November, the price of £9.50/MWh for settlement period 16 (07:30-08:00) was the lowest of the week. This period coincided with high output from wind generators, with National Grid paying them to reduce output by over 200MWh.

The week’s highest price of £146.68/MWh was for settlement period 35 (17:00-17:30) on 5th November. During this period, the system operator had to take significant actions to boost output (by over 600MWh) and return the UK system to a balanced state. These actions included paying Taylors House Open Cycle Gas Turbine (OCGT) £189/MWh and Crauchan pumped storage hydro £140/MWh. The largest contributor, Rye House Combined Cycle Gas Turbine (CCGT), received £98.25/MWh.

2018-11-12 pricingreportgraphs3

Renewables and other

Output from renewables was up significantly during week 45, with generation from offshore and onshore wind averaging 9.1GW.

Although renewable output was higher generally, wind generation saw large fluctuations; from little over 3GW on 5th November to more than 14GW on 9th November. When comparing the generation stack on these days, higher wind levels on 9th November meant that output from CCGTs was down 51% and coal-fired plant reduced by 58%.

2018-11-12 pricingreportgraphs4

Seasonal Contracts

Secure and promote* (Seasons +1, +2, +3, +4) baseload contracts reversed their recent trend downwards during week 45, with average increases of £1.50/MWh over the 4 contracts.

Rising carbon prices influenced trading early in the week, and paved the way for gas and power price increases. Further bullish sentiment was provided by rising European coal prices during trading on 7th November, with coal prices up over 2%. The most significant movements were seen on Thursday 8th, following the naval collision that affected Norwegian gas supplies. The incident caused bullishness in the prompt, which then fed through to gains on the curve; the front 4 seasons jumped over £0.80/MWh from the market’s closure on 7th to its re-opening on 8th.

2018-11-12 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.

2018-11-12 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, call us 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.