In the latest issue of our Current± Price Watch series – powered by LCP Enact – we take a look at how Britain’s power system reacted to the heat wave, and the record high cost of balancing the system as National Grid ESO worked to overcome constraints.
Day-ahead: Capacity is strained amid heatwave
Day-ahead prices jumped to a high of £553.7/MWh on 18 July, up significantly from the previous week’s high of £350/MWh as the heat in Britain rose.
Meanwhile, the day-ahead N2EX price jumped to £647.64/MWh as continental Europe too struggled with generation constraints and increased demand caused by the record high temperatures.
As a result of this, National Grid Electricity System Operator issued two electricity Capacity Market notices on Monday 18 July.
While these notices are fairly common over the winter period – for example it issued numerous notices over the winter of 2020/21 when particularly cold weather hit Britain, leading to turbulence in the market that pushed the Balancing Mechanism price over £1,000/MWh – two in a day during the summer is unusual, and speaks to the significant impact.
Intraday: Solar meets quarter of demand
APX mid intraday prices similarly jumped to a high of £571.19/MWh on 18 July, before falling again towards the end of the week as temperatures dropped.
As noted in last week’s Current± Price Watch, the heat has an impact on generators including CCGTs, biomass and nuclear units, which last week had to redeclare their Maximum Export Limit, as they cannot optimally generate at high temperatures.
Reports also emerged across the media focused on the hot weather’s impact on solar generation, with many highlighting that the efficiency of panels reduces beyond 25°C. While this is true, it represents just a 0.5% or lower drop in efficiency per degree above 25°C.
As such, the clear skies and high irradiation still saw solar stepping up to meet a quarter of the UK’s electricity demand on 19 July, according to Solar Energy UK. Solar reached a peak of 7.77GW around midday, and provided an estimated 66.9GWh, or 8.6% of the UK’s power needs over the 24 hour period.
Chris Hewett, chief executive of Solar Energy UK said: “It’s marginally better for efficiency in the spring but essentially, if you have more light, you produce more solar power. You have to remember that solar panels work all over the world. The same technology we put on our roofs is used in solar farms in the Saudi Arabian desert.”
Imbalance: UK buys power from Belgium at record prices of nearly £10,000/MWh
On Wednesday, prices in the Balancing Mechanism surged to £9,724.54 for trades on the NEMO Link interconnector, as Britain turned to Belgium to help meet a constraint on the system near London.
“Last week shattered records in the power sector, with power being purchased at nearly £10,000/MWh from Belgium to manage a system constraint in the south east of England, leading to the second most expensive day of balancing actions we have seen,” said Rajiv Gogna, partner, LCP Energy Analytics.
“This will shine a light on the readiness of the current network infrastructure to deliver the future power system, as well as ensuring security of supply is adequate across the entire year and not just winter.”
While this is more than 5,000% higher than the typical balancing prices, it did not have a wider impact on the imbalance price, which hit a high of £ 774/MWh on 19 July, and dropped to a low of £94/MWh on 24 July.