This week’s issue of Current± Price Watch – powered by Enact – looks at Ofgem being granted a net zero mandate to support the road to decarbonisation, the Energy Networks Association’s (ENA) three step action plan for grid connections and National Grid ESO’s (NGESO) predicted 30% drop in balance prices this summer.
Day ahead: prices hit highs of £152.9/MWh as Ofgem is granted net zero mandate
The Day ahead prices saw a max high of £152.9/MWh at the start of the week (17 April). The lowest price was hit on 19 April where it stood at £74.2/MWh.
Energy regulator Ofgem was granted a statutory duty to assist in the delivery of net zero last week (17 April). This had been confirmed via the third reading of the Energy Security Bill.
Tabled by Baroness Hayman, Lord Hollick, Baroness Altmann and Lord Teverson, the amendment regarded “GEMA general duties relating to climate change” and would grant the UK’s electricity regulator a net zero mandate.
An Ofgem spokesperson told Current±: “This is a decision for Government as Ofgem operates under a statutory remit set by it and any decision on changing our remit is for Government to make.
“Our duty to protect the interests of current and future consumers and ensure sustainable development of the energy sector, is entirely consistent with the net zero mandate.”
The amendment follows UK energy trade associations expressing concerns over the extent of power that Ofgem has to deliver net zero and has been welcomed by various members of the energy sector.
“Reforming Ofgem’s mandate to consider net zero in every decision takes is long overdue. We’re glad that the House of Lords has listened to calls from across the energy sector to make this vital change and hope that MPs will support it when the Energy Bill goes back to the Commons in the weeks ahead,” said head of public affairs at RenewableUK, Nathan Bennett.
Intraday: ‘Great Grid Upgrade’ to support UK renewable journey
Intraday prices saw a max high peak on 17 April of £202.69/MWh before falling to a low of £49.15/MWh on 19 April. The Average price for Intraday hit its lowest point on 24 April where it stood at £89/MWh.
Last week saw the announcement of two key developments for the UK energy sector: the ENA’s three-step action plan to speed up the UK grid connection process and National Grid’s ‘Great Grid Upgrade’.
The ENA aims to tackle the ongoing grid connection conundrum which is causing major delays in the development of renewable generation projects. This is also affecting the rollout of other low carbon technologies such as electric vehicles (EVs) and heat pumps.
If the UK wants to attain its net zero power grid by 2035, renewable projects must be able to connect efficiently, but most are facing delays of five to ten years at least. Pete Aston, specialist connections engineer at Roadnight Taylor recently told Current± that in early January 2023, there were “over 300GW of accepted connections in the transmission entry capacity (TEC) register”.
The three steps the ENA has called for include a reformation of the distribution network connections queue to promote mature projects and prevent queue blocking, a change in how transmission and distribution networks coordinate connection to improve interactivity and the creation of new contractual options to grant greater flexibility for storage customers.
“The changes we’ve announced today will go a long way to speeding up connections, but more fundamental changes will be needed. Through the regulatory regime, we need to overhaul how connections are managed and enable networks to invest in capacity early.
“This early investment is crucial if we are to power millions of electric vehicles and heat pumps and connect the massive amounts of renewables and batteries we know are needed in the coming decade,” said David Boyer, director of electricity systems at the ENA.
On 19 April, National Grid revealed its ‘Great Grid Upgrade’, which the system operator is calling “the largest overhaul of the grid in generations.”
The upgrade is set to be explored as a means to reduce the UK’s reliance on fossil fuels and grant the UK energy security and independence. This will help reduce energy bills for households in the future and support the ongoing energy transition.
The upgrade is set to build new infrastructure across England and Wales to enable more clean energy to be transported from their generation sites at sea to where it’s needed.
“Our vision is a clean, fair and affordable energy future for the UK. The Great Grid Upgrade will play a major part in delivering this,” said Carl Trowell, president of strategic infrastructure at National Grid.
Imbalance: NGESO predicts 30% drop in balance prices this summer
On average, Imbalance prices remained relatively stable throughout the week. Wednesday 19 April experienced the most volatile imbalance prices ranging from £203.13/MWh to £-70.47/MWh.
Last week National Grid ESO (NGESO) released its Summer Outlook 2023 which forecast that imbalance prices would fall 30% lower than summer 2022.
Although wholesale prices still remain high they have lowered significantly since last year which NGESO has said contributed to the lower prices this year.
NGESO also credited a number of its policies and services in contributing to lower balancing costs such as:
- Frequency Risk and Control Report, which assesses magnitude and likelihood of transient frequency deviations
- Voltage Mersey and stability pathfinders reaching phase one
- Constraint Management Interstrip Service
“The ESO has taken a number of measures to reduce costs to consumers through the use of balancing tools and capabilities to manage the system effectively,” said the NGESO in its report.
“Combined with a reduction in wholesale prices, we expect balancing costs could be around 30% lower than last summer. We recognise the importance of proactive, regular, quality engagement with industry and will continue to use our weekly Operational Transparency Forum as a key forum for engagement.”
Overall NGESO’s outlook for this summer was positive, with no emergency instruction anticipated and an expected sufficient supply available to meet supply throughout this period.
LCP Delta consultant Matthew Deitz will be speaking at National Grid ESO’s “Market Roadmap 2023 Webinar” on 25 April. The webinar will discuss some of the key aspects of the ESO’s 2023 Markets Roadmap which released on 31 March, 2023.
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