With the temperatures dipping, the last week has once again seen Britain’s energy system become stretched. In this week’s Current± Price Watch series – powered by LCP Enact – we take a look at the price highs, the debate raging around onshore wind and the continued expansion of the Demand Flexibility Service.
Day Ahead: Prices surge as temperatures drop
Local day ahead prices jumped to a high of £1205.7/MWh on Tuesday 29 November, beating the high of £850/MWh seen the week before.
Colder weather has been particularly key in driving up demand, and with it power prices – a concerning point given the MET Office is predicting temperatures will drop into minus figures later this week.
In a post on LinkedIn, Limejump expanded: “Last week, the market witnessed gains across both the #power and #gas markets, driven by both the cold weather spell and low #windgeneration. There has also been noticeable withdrawal from gas assets this week driven by the cold weather, however, operators are also looking to optimise inject-ability opportunities, to fill their assets if prices collapse and balance the Q1 premiums.
“Since the previous Friday’s close, UK NBP price for summer 2023 rose a total of 12.00p/therm to 322.00p/therm whilst the UK Baseload rose by £34.00/MWh to close on £304.00/MWh by Friday 2nd December. Further along the curve, there has been a slight increase in volatility in the Q2 window, caused by pressure from energy retailers. This volatility is a detachment from the fundamentals and is expected to be consistent until the end of the year.”
Intraday: Growing low-carbon generation to mitigate power price instability
Intraday prices (APX Mid) remained fairly stable over the last week, with a high of £508.42/MWh and a low of £148.8/MWh, both on Monday 28 November.
The relative stability of power prices will be further supported going forward by an increase in nuclear capacity in France in the short-term, and by Britain in the long-term.
“Across the continent, there has been some welcoming news that more of France’s #nuclearpower plants have become available, boosting the total capacity to 40GW out of a total of 61GW,” Limejump wrote on LinkedIn.
“‘Demand curtailment’ incentives are working across Europe, with a circa ~20% reduction so far. However, there is still a concern that there will be a lot of pressure on the IUK interconnector as France is expected to import from the UK this winter. European gas storage levels are high, the highest they have been over the past five years.”
Over the last week, the UK has moved to expand its nuclear capacity, with EDF’s Sizewell C taking a step forwards thanks to the government announcing a “historic” £700 million stake in the nuclear project to boost its energy security.
With the current energy crisis driven by the high international gas prices, there has been significant focus on how to expand domestic generation. One particularly controversial generation technology is onshore wind.
This follows an amendment put forward by Simon Clarke MP, the former Secretary of State for Levelling Up, Housing and Communities, that looks to lift the de facto ban on onshore wind, gaining increasing support.
Onshore wind and solar are nine times cheaper than fossil fuel generation, but there has been a running debate as to whether they are at odds with food security. This has been widely rebuffed by the energy sector, with the solar sector highlighting that the technology uses less than 0.3% of UK land.
As the debate around lifting the prohibition on onshore wind continues amid rising energy prices, Business Secretary Grant Shapps was criticised for stating that the turbines are now “so big” they cannot be built on land, amongst other claims.
Imbalance: Demand Flexibility Service continues to grow
With the colder weather and tight capacity at the beginning of last week, imbalance prices hit a high of £979/MWh on 29 November, and a low of £68/MWh on 4 December.
Amid the tighter prices seen over the last week, National Grid ESO ran a further two tests of its Demand Flexibility Service. It put out a request for a 250MW per half an hour demand reduction across the evening peak on 30 November and 1 December.
The number of participants have continued to grow, with supplier OVO announcing that its customers would be able to take part on 29 November.
“We’re pleased to be joining the National Grid Electricity System Operator’s Demand Flexibility Scheme and launching another trial which rewards customers for their efforts in making small but significant changes to the way they consume energy,” said Raman Bhatia, CEO of OVO.
“We know that winter is going to be a challenging time for many, so relieving that pressure where we can, and supporting our customers has never been more important.”
There are now 25 domestic and non-domestic participants in the Demand Flexibility Service:
Provider |
Domestic or Non-domestic |
Domestic |
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Domestic and Non-domestic |
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Non-domestic |
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Non-domestic |
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Non-domestic |
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Non-domestic |
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Domestic |
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Domestic and Non-domestic |
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Domestic |
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Non-domestic |
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Non-domestic |
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Non-domestic |
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Domestic |
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Domestic and Non-domestic |
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Domestic |
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Domestic |
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Non-domestic |
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Domestic and Non-domestic |
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OVO Energy |
Domestic |
Non-domestic |
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Domestic |
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Domestic |
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Domestic and non-domestic |
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Domestic and Non-domestic |
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Non-domestic |
“This scheme provides a real opportunity for our supply customers with flexibility in their operations to play their part in strengthening Britain’s energy security this winter whilst cutting their electricity bills. We’re delighted that Drax Energy Solutions has become one of the very first approved providers, enabling our customers to benefit directly from participating in the scheme,” said Adam Hall, Drax’s director of Energy Services.
“We’ve been speaking with customers about the benefits the scheme offers their organisations and these conversations have been really positive. We’re delighted that customers including Ford have agreed to be part of the scheme, adjusting their manufacturing processes and offering more flexibility and stability to the grid whilst cutting their energy usage and contributing to their own net zero goals.”
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