In this week’s edition of our Current± Price Watch series – powered by LCP Enact – we take a look at the impact of volatile wind generation as well as poorly timed outage on power prices, as well as additional details on the ESO’s plans for the upcoming winter.
Day Ahead: Volatile wind generation and volatile prices
Wind picking up across the UK last week led to more volatile power prices than seen in recent months. Day ahead prices dipped to £50/MWh and hit a high of £470/MWh last week.
Last week started off with high winds pushing local day ahead prices down to £63.4/MWh for example, before a mid-week lull.
“Low wind on Thursday added a significant premium to the day-ahead price in comparison to the rest of the week. A unit trip at Didcot B then added further premium into intra-day prices on Thursday morning,” said Tim Sparks, LCP Energy consultant
“Wind ramped up sharply on Friday and remained at a high level through Saturday which again saw system prices go negative, reaching a low of £-69.49/MWh.
“These negative system prices occurred over the solar peak on Saturday, where the combined output from solar generation and transmission wind prior to curtailment surpassed 20GW. Market watchers would have seen ahead of time that the residual demand (NDF net of expected wind and nuclear generation) was negative over the solar peak to the tune of -1.2GW, however the risk of negative system prices was not fully priced in at the day-ahead stage, with intra-day prices finding a lower level as this risk failed to dissipate.”
The volatility over the last week is a taste of what can be expected in the UK market over the coming winter. On Wednesday 28 September, National Grid ESO set out its order of actions for managing the coming challenges at its Autumn Markets Forum.
This included enhanced measures such as recalling transmission assets from outage, plans to use emergency assistance from other system operators, its Demand Flexibility Service (DSF) and – as a final measure – instructing Winter Contingency Units to warm.
These Winter Contingency Units are coal fired power plants it has contracted to stay online over the winter, in a move expected to cost between £340 million and £395 million, the operator revealed.
Intraday: Double trip leads to non-BM STOR assets coming on at £7,000/MWh
Intraday prices were also impacted by fluctuating wind generation last week, dipping to a low of £-39.15/MWh for Period 10 on Monday to a high of ££493.64/MWh for Period 16 on Wednesday.
“The early hours of Monday saw transmission wind output surpass 16GW prior to curtailment. This saw system prices go negative as the level of wind curtailment peaked at almost 4GW. Prices on the power exchange also went negative for a significant portion of the night,” continued Sparks.
“Wind output was forecast to fall through Tuesday and into Wednesday overnight, however this fall out began earlier than forecast on Tuesday and outturn wind then tracked around 2GW below the forecast level throughout Tuesday and Wednesday.
“This led to intra-day prices trading at a significant premium to day-ahead across these two days, with the APX (MID) price peaking at £493.64/MWh for Period 16 on Wednesday as both of Drax’s coal units struggled to deliver to their scheduled levels of generation.”
In addition to the strong wind generation across the beginning of last week, there was a double trip from the Langage and Staythorpe-2 CCGT units on Tuesday. This represented a combined loss of ~1.2GW of generation.
As wind generation at the time was already out-turning in excess of 2GW below forecast, the trips meant National Grid ESO had to bring on non-Balancing Mechanism STOR assets at prices of up to £7,000/MWh to cover the shortfall.
Imbalance: Final Winter-22 baseload contract closes at £623.39/MWh
Imbalance prices were similarly volatile over the past week, dipping to a low of £-69.49/MWh, and reaching a high of £800/MWh.
National Grid ESO leant heavily on the BM to manage the volatility in generation throughout the week.
“Over the weekend NGESO contracted large volumes of BSAD sell actions to manage an excess of inflexible generation through the overnight periods, in addition to accepting negatively priced bids in the BM,” said Sparks.
“In the early hours of Saturday, NGESO agreed up to 2GW of BSAD sell trades at negative prices. Sunday saw an even higher volume of BSAD sell actions during the overnight period, but the bulk of these were at positive prices, unlike the previous night.”
Amid the instability of the last week, focus has continued to be on the upcoming winter, with the final opportunity to trade in the Winter-22 baseload contract concluding. This had gained through the first half of last week to close at £623.39/MWh on Wednesday, but fell back slightly on Thursday to £601.87/MWh.
This is again up from their low point in September of £506.31/MWh, which was the lowest closing price for this contract since late July.
“Monthly contracts then proceeded to shed value in Friday’s trading,” explained Sparks.
“Friday’s losses were more pronounced on nearer dated contracts, with the new front-month November-22 baseload contract falling by 7% to close at £580.55/MWh. Bearish sentiment came from an easing of short-term supply concerns in the gas market.
“The market had been wary of the dispute between Gazprom and Ukraine’s state-owned gas company Naftogaz impacting the remaining Russian flows into Europe, however gas flows on Friday remained stable.”
Along with unveiling its order of actions, National Grid ESO last week also set out a consultation on the extension of its Dynamic and Static Firm Frequency Response (FFR) systems.
While it is in the process of expanding its ancillary services arsenal, it is looking to continue to use these FFR services indefinitely.