Current± Price Watch: High capacity market clearing price points to continued caution

In this week’s edition of Current± Price Watch – powered by Enact – we take a look at the caution suggested by the high T-1 Capacity Market clearing price, the changing face of nuclear in Britain and the saving seen by industrial participants in the ESO’s Demand Flexibility Service.

Day Ahead: T-1 Capacity Market clears at second highest rate

Day Ahead prices hit a high of £190.2/MWh for the last week on Monday 13 February, and a low of £51/MWh on Friday 17 February.

While these stable prices have become common in recent weeks as Britain moves out of the coldest parts of winter with gas storage levels remaining high and wholesale power prices falling, the outcome of this year’s T-1 Capacity Market auction highlights the continued caution of the sector when looking forwards into the coming year.

The T-1 auction cleared at £60/kW/year, the second highest price after last year’s record of £75/kW/year – for reference, the T-1 auction for 2020/21 cleared at just £1.00/kW/y, a moderate jump on the record low set in June 2019, when the T-1 auction cleared at just £0.77/kW/y.

“Of the 5.8GW auction target, 4.6GW was met by existing generation (3.6GW of which consisted of large coal, gas and nuclear units) and 0.4GW of DSR. The remaining 0.8GW was fulfilled by new build assets consisting mainly of battery storage units,” said Chris Matson, a partner in the LCP Delta team.

“We are also expecting a relatively high clearing price in the T-4 auction starting this Tuesday (for delivery in 2026/27) after last year’s auction cleared at a record £30.59/kW/y. Capacity from existing generation and interconnection is insufficient to cover the requirement of 43.9GW, so new build capacity will be required and this will likely drive the clearing price. 7.4GW of nameplate new battery storage capacity has prequalified, but heavy de-rating factors mean it can only contribute up to 1.9GW towards the target. This means we could see a large amount of new build battery storage capacity clear.”

Intraday: Sizewell B closes for 18th refuelling

The APX Mid intraday price hit a high of £190.38/MWh last week on 14 February and a low of £45.14/MWh on 18 February.

Power prices in Britain have been aided over the winter by its surging renewable generation – in particular wind generation – but elsewhere its nuclear fleet is aging with limited additional capacity set to come online.

The only new nuclear asset currently under construction in Britain is EDF’s 3.2GW Hinkley Point C asset in Somerset. Within its financial results for 2022 however, the French energy giant stated that the expected cost of the project has grown from around £26 billion to £32.7 billion.  

The company has the biggest nuclear generation fleet in the country, having delivered 43.6TWh of low carbon power throughout 2022 representing a 1.9TWh increase on 2021. This is despite Hunterston B and Hinkley Point B having ceased generation in January and August respectively. Both are now actively delivering a defuelling contract for the UK Government.

Currently, its Sizewell B nuclear power plant in Suffolk is offline for a £80 million refuelling and maintenance programme. This will be the sites 18^th such outage in its 28 years old – with the site the youngest nuclear reactor in Britain. So far it has produced 243TWh since it started operating.

“Sizewell B is vital to the ongoing security of low carbon electricity in the UK and outages such as this are key to delivering the reliable power that the station is recognised for,” said Robert Gunn, Sizewell B station director.

There are 13 nuclear reactors at six plants in the UK, generating around 16% of the country’s electricity in 2020.

Imbalance: Further Demand Flexibility Service tests as trial period nears end

Imbalance prices once again sat at a low of £0/MWh over a number of days last week, and hit a high of £269/MWh on 13 February.

The ESO has continued to run Demand Flexibility Service (DFS) tests, with the end of the trial period now starting to approach.

This includes an onboarding test on 16 February, where the operator looked to procure 100MW. There is also a regular test scheduled for 21 February, with the operator calling for 250MW of demand reduction.

Companies are increasingly sharing insights from the test period, for example Drax Energy Solutions has revealed that its customers have reduced demand by 287MWh during the test events. With the set rate for demand reduction sitting at £3,000 per MWh, the scheme has therefore generated revenue of over £875,000 for participating customers.

These customers including industrial heavyweights like global vehicle manufacturer Ford and SME FI Real Estate Management.

“Drax Energy Solutions is one of the first approved providers of this service. Our business customers with flexibility in their operations can play a significant role in boosting Britain’s energy security whilst cutting their own electricity bills,” said Adam Hall, Drax’s director of Energy Services.

“Customers including Ford and FI Real Estate Management have agreed to be part of the scheme, adjusting their manufacturing processes and EV charging. This will deliver more flexibility and stability to the grid, by cutting their energy use at key times, which in turn contributes to their own net zero goals.”

The number of suppliers involved in the DFS scheme has continued to grow throughout, with providers now including:

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