In this week’s issue of our Current± Price Watch series – powered by LCP Enact – we take a look at surging baseload power prices over the winter period after Gazprom announces Nord Stream 1 is shut indefinitely.
Day ahead: Growing pressures in Europe bring interconnector availability into question
Last week’s highest day ahead price fell slightly to £740/MWh on 30 August, down from £777.10/MWh on 24 August the week ahead, as interconnector dynamics remained constrained.
Its minimum price dropped significantly on last week, however, hitting a low of £150/MWh on 4 September. During the previous week the day ahead price didn’t fall below £371.99/MWh on 25 August.
Internationally, power prices have remained volatile over the last weeks of August and into September. This is already having a significant impact on baseload power prices for the coming winter months.
“We saw baseload prices for November and December being traded above £900/MWh,” explained Rajiv Gogna, partner, LCP Energy Analytics.
“Increasing pressures on the European side for a number of reasons are bringing into question how available interconnectors will be during system stress events, which are driving these prices.”
Intraday: Nord Stream 1 shutdown pushing up gas prices
The intraday price hit a high of £591.77/MWh last week, down from the previous week’s high of £704.82/MWh.
It hit a low of £151.32/MWh on 31 August, down significantly from its low of £321.67/MWh the previous week.
Potentially the biggest driver of the high baseload power prices for winter has been the closure of the Nord Stream 1 pipeline between Russia and Germany on Friday 2 September. Gazprom – the Russian state-owned oil giant that owns the pipeline – said it had found leaks that need to be repaired.
This further tightens gas supply as weather begins to cool and demand starts to rise as we move into the winter period.
Energy security and the impact of surging bills remains a significant concern in Britain over the coming period. On 26 August, Ofgem announced that the price cap for the coming Q4 period will be £3,549, up 80% from current levels.
In an effort to boost the UK’s gas security, North Sea Transition Authority has granted approval and consent to allow Centrica Offshore UK to reopen its Rough gas storage site situated off the East Yorkshire coast at the end of August.
Nations across Europe have been working to increase their gas storage levels ahead of the winter in an effort to increase their security and avoid blackouts.
Imbalance: France looks to restart its nuclear fleet
The imbalance price hit a high of £719.87/MWh on 29 August last week, down from a high of £890/MWh on 25 August the week previously.
It hit a low of £0/MWh on 31 August, down significantly from the previous week when it didn’t dip below £244.47/MWh. This puts the imbalance price significantly more varied over the last week than the relative calm of the previous few sunny weeks.
Over the summer, Britain has been a net exporter of power to mainland Europe over many weeks and months. This has been largely driven by nuclear outages in France, along with the LNG market helping to lower wholesale prices in Britain beyond those of the mainland at various points.
During a press conference at the end of last week, state-owned EDF announced it plans to restart all of its nuclear reactors this winter. Currently 32 of the company’s 56 reactors in France have been shut to allow for maintenance and testing after stress corrosion was detected at a number of sites.
This will help boost energy security in France, which should have a knock-on impact on what is available via interconnectors in Britain.