In our weekly issue of Current± Price Watch – powered by Enact – we take a look at Britain’s interconnector plans, the approach of the end of the ESO’s Winter Enhanced Actions options, and passing on the drop in wholesale prices to consumers.
Day Ahead: Britain eyes increased interconnector capacity
Over the last week, the Day Ahead price hit a high of £174/MWh on 14 March, and a low of £23.4/MWh on 13 March.
It was revealed that the UK and France had signed an agreement to increase interconnector capacity between the two countries by around two thirds last week. The countries already share three interconnectors with a capacity for 4GW of electricity.
Scaling this capacity by two thirds would increase the capacity by 2.66GW to 6.66GW, subject to regulatory approval, and could prove pivotal in assuring energy security and supporting net zero prospects.
The UK had already announced an aim to have at least 18GW of interconnection capacity by 2030. These plans however took a hit today with the Norwegian government having refused to provide a license for a 1.4GW proposed interconnector between Scotland and Norway.
Interconnector capacity can also play a major role in reducing Day Ahead Prices by ensuring a steady flow of energy is entering the UK, maintaining a stability of supply that keep power prices balanced.
Last week, France delivered 22.08GWh of energy via interconnectors with the UK.
GB Grid: Last Week's Interconnector and Transfer Totals— Imports – GB Grid (@UK_Imports) March 13, 2023
Northern Ireland: -20.74GWh
On Thursday, the UK government announced a £205 million budget for the fifth Contracts for Difference (CfD) funding round, which is the first auction to run annually. The latest funding round includes £170 million for established technologies, such as offshore wind, and a ring-fenced budget of £10 million available for tidal stream projects.
So far, CfDs have supported projects totalling almost 27GW of renewable capacity (25% of which is in Scotland), with the most recent round (AR4) securing nearly 11GW of low-carbon capacity, according to the Department for Business, Energy and Industrial Strategy (BEIS).
“Today’s budget announcement, the move to annual auctions and continued investment in renewable energy will limit the impact of events like Putin’s illegal war in Ukraine and drive our overriding priority for the UK to have amongst the cheapest wholesale electricity prices in Europe,” said minister of state for energy security and net zero, Graham Stuart on the announcement of the budget.
The growth in renewables that the CfD’s have supported has been key to the stability of power prices over the winter, with strong wind generation helping to displace expensive gas generation. As demonstrated by the recent Climate Change Committee report, the energy system of the future will be dominated by low cost renewables, supported by interconnectors, nuclear and low-carbon flexible support.
Intraday: Spring Budget extends EPG after wholesale power prices fall
APX Mid intraday prices were similarly stable last week with a high of £211.63/MWh on 14 March, and a low of £-2.96/MWh on 13 March.
As part of the Spring Budget announcement last Wednesday (15 March), Chancellor Jeremy Hunt announced that the Energy Price Guarantee (EPG) will be kept at its current rate of £2,500 until the end of June.
Lower wholesale costs were a significant driver to the UK Government abandoning its plan to raise the EPG to £,3000, as announced in the Autumn Statement.
Prior the extension announcement, the UK Government was expected to borrow £12 billion to fund the EPG.
As energy prices have fallen by 50% since November 2022 – the latest Default Tariff Price Cap having been set to £3,280 – this figure has been reduced by two-thirds.
The total governmental cost of the EPG is estimated at £29.4 billion.
“Once again, a UK budget has seen some significant energy policy announcements that will stir up conversation and opinion across the country. It also shows how reining in energy prices is seen as key to restraining inflation,” said Robert Buckley, head of relationship development at Cornwall Insight.
“The pre-budget announcement to maintain the Energy Price Guarantee at £2,500 had already brought much-needed clarity to energy suppliers and no doubt relief for many households.”
The price of extending the EPG at its current rate is estimated to be an additional £2.6 billion which, Dr Craig Lowrey, principal consultant at Cornwall Insight pointed out, is a “small price to pay to protect already hard-hit households.”
The EPG extension has received widespread support within the sector.
Imbalance: Winter Enhanced Action options come to an end
The imbalance price hit a high of £ 275/MWh on 14 March, and a low of £ -20.41/MWh on 13 March for last week, following the same pattern as both the Day Ahead and Intraday prices.
Further Demand Flexibility Service (DFS) tests were run last week as the trial period nears its end, with a 50MW test on 14 March and a 250MW test on 15 March. The ESO has utilised the service twice for live events, and run more than a dozen tests as part of the two monthly tests as well as onboarding tests.
Over the winter period, DFS has delivered 0.6GWh of capacity over 16 test events and two live events, the ESO announced as part of a webinar last week.
Overall there are 1.6 million people registered for the service offering c.350MW of contracted capacity, from 31 DFS approved providers. Since November, it has delivered >1.6GWh of capacity.
Whilst broadly considered a success, proving the value of domestic flexibility to supporting the wider system during periods of tight capacity, it has been expensive. The ESO spent around £5.6 million on the tests, and £3 million on the live events, it announced during the webinar.
Meanwhile, the Government last week called on the ESO to explore the potential of signing contingency coal contracts for the coming winter. This followed the units being called into action for the first time this winter on 7 March, amid cold weather, high demand, low wind generation and interconnector instability.
“The two remaining units at West Burton A coal fired power station in Nottinghamshire will close as planned on 31 March 2023, in line with the agreement signed last year. The station and its workforce have fulfilled the request to have 400MW available through Winter ‘22/23 as an emergency standby option,” a spokesperson for EDF told Current± for example.
“There are a number of workforce and operational reasons that mean extending the life of West Burton A again is very challenging.”
“For example, retaining suitably qualified and local personnel to ensure safe operation was a major challenge last year and, looking forward, becomes untenable as many of the workforce have stayed on well beyond planned retirement dates already. Approximately half the staff are retiring by Q2 this year. Notices have already been given for around half of these and they leave early April. This includes a large part of the station leadership team.”