In this week’s issue of our Current± Price Watch series – powered by LCP Enact – we take a look at how interconnector dynamics and the weather have driven up day ahead prices, as well as how battery energy storage companies’ financial results are highlighting the impact of the strong ancillary market.
Day ahead: record high day ahead prices
Over the past week, the day ahead prices in Britain hit a high of £649.44/MWh for Monday 22 August, according to LCP Enact. This is up significantly from last week when it sat at £451.7/MWh.
The highest average price across 22 August on Nord Pool specifically was £500/MWh, a record high level according to LCP Enact. But this is set to be broken tomorrow (23 August), when the average day ahead price is £539.59/MWh.
“The combination of low wind, the lack of strong interconnector flows into GB, and the high number of generating plants currently offline for maintenance are all feeding into these record high prices, adding additional premium on top of the impact of high gas prices,” said LCP Energy consultant Tim Sparks.
These record high day ahead prices take the rolling price for power above £400/MWh for the first time ever to £415/MWh, August 17th to 23rd according to analysis from the Nuclear Industry Association.
“These unprecedented costs are the price of the UK’s continued reliance on gas, which is wholly unsustainable and completely unaffordable,” said Tom Greatrex, chief executive of the NIA.
“Record prices, coupled with repeated warnings this summer over electricity supplies, underline the urgent need for new nuclear projects.”
Intraday: Low wind lead prices to spike
Intraday prices over the past week have been somewhat more stable than day ahead, following on from surges during the heatwave in the previous week. The APX Mid price hit a high of £559.6/MWh on 17 August, down from £600.9/MWh in the previous week.
Like the day ahead prices, these picked up over Sunday and into Monday this week due to low winds.
High prices currently represent a small taste of what is expected over the coming winter, with keen focus in Britain’s power system remaining on security of supply amid the wider energy crisis driven by high international gas prices.
In response to this concern, National Grid ESO has contracted two coal-fired power stations to stay online over the coming winter period, adding 2,000MW of capacity. How exactly these contracts will be managed – and at what cost – remains to be seen however.
Imbalance: Battery revenues remain high amid background of uncertainty
Imbalance prices were more volatile over the past week, with a high of £649.63/MWh and a low of -£21/MWh, predominantly driven by the weather.
Battery energy storage has continued to be one of the key beneficiaries of increased imbalance prices, with quarterly revenues for the end of June 2022 released this week highlighting the impact of surging ancillary services.
In its results today for example, Harmony Energy noted that while trading volumes remained low compared to winter, a large spread of wholesale opportunities helped boost it to record profits. The Capacity Market Notice issued on 18 July amid the hot weather pushed the British evening wholesale peak prices as high as £647/MWh, highlighting the range of opportunities currently.
It noted that given the overall market outlook amidst the high gas prices, it expects such strong price periods to continue until 2026.
The battery energy storage sector has – perhaps unsurprisingly given current market dynamics – continued to grow at pace in Britain.
“Great Britain is one of the leading markets for battery energy storage,” explained Alex O’Cinneide, founder and CEO of Gore Street.
“Year on year since the market’s inception, growing from 17MW in 2017 to 1.6GW in 2022, there has been a growing demand for battery systems. The average project size has also increased, going from 6MW in 2017 to more than 45MW in 2021.”
He continued to detail the biggest market-specific drivers for storage for Gore Street, noting:
- “In Great Britain, due to higher renewable penetration, National Grid procured more FFR and DC than the market expected. Delays in commissioning new energy storage sites contributed to attractive pricing levels for grid balancing services.
- “In Ireland, lengthy delays for grid connection have materially affected the development of additional storage sites. This supported the higher-than-expected revenues generated by battery operators. Contracts are also directly exposed to a multiplier which reflects monthly intermittency in generation.”