Threat of cold snap looms over power market
The Haven Power market report brings you up-to-date on weekly changes in the energy market. Here’s what happened over the last 7 days, starting 10th December:
- UK gas market well supplied by LNG cargoes and Norwegian flows
- Day-ahead prices spike with cold weather forecasts
- National Grid turns down Scottish wind farms
- Fuel commodities strengthen, oil remains largely flat.
Day-ahead prices drew on influence from numerous factors during week 50, with high wind output not having the usual suppressing influence on day-ahead prices.
The highest price for the week, £65.50/MWh, was for baseload delivery on Friday 14th December; despite relatively high wind output. Peak demand on 14th December was expected to be the highest for the winter so far, pushing premium into NBP products, with power following.
The lowest price for the week, interestingly was when wind output was relatively low, just 4.6GW across the day, suggesting other factors outweighed the downwards pressure high wind forecasts have on power prices.
There were several spikes in imbalance prices over week 50, with prices exceeding £100/MWh for 10 settlement periods.
The highest price for the week was for settlement period 21 (10:00-10:30) on 10th December, when the final price out-turned at £110/MWh. The final price was set by Pembroke Power Station, a CCGT, which had an offer to increase generation accepted by National Grid. Severn Power Unit, another CCGT plant, had offers accepted totalling 150MWh of generation during the 30minute period.
The lowest price for the week was for settlement period 6 (02:30-03:00) on 15th December when the UK system had excess generation, largely thanks to over 11GW of wind generation, and low demand in the early hours. The final price was set by an accepted bid to reduce generation by 193MWh, at a price of £13/MWh. A large number of wind generators were paid to reduce output, the majority of which were in Scotland, as the system operator removed Scottish wind farms from the generation stack.
Renewables and other
Renewable output was low at the beginning of the week, with windier conditions arriving towards the end of the week.
Wind generation was at the lowly level of just 2GW on 10th December before climbing dramatically to 13GW over the next 48 hours; the result was a depression of day-ahead prices compared to delivery on 10th December. At its peak (14.8GW), wind output contributed 35% of the generation stack, more than coal and gas combined.
Concerns of a cold snap in the UK during week 52 continue to move around the market, with the extent of the cold spell uncertain, premium has been pushed into the front-month gas and power contracts.
Secure and promote* (Seasons +1, +2, +3, +4) baseload contracts all made fairly significant gains during week 51, gaining almost £2.50/MWh across the four products.
Whilst the Brent crude oil benchmark, a recent bearish driver for gas and power prices, weakened over the week, the rest of the commodities mix saw more bullish movements. Weak economic data from China hinted at lower fuel demand from the world’s largest oil importer, and acted as the bearish stimulus.
The carbon market is currently deemed to be short, and as a result carbon was trading close to the highs it reached in September.
The NBP gas prices were bullish across the entire week, despite being reasonably well supplied by liquefied natural gas (LNG) deliveries and Norwegian supply. The threat of cold weather has pushed premium into the near curve, and some of this appears to have filtered through to later-dated products.
A milder than expected start to the winter in Asia has made the NBP a more competitive market for LNG cargoes since October, improving the supply outlook in the UK.
*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 Summer 19 and Winter 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 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.
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.