In this week’s edition of our Current± Price Watch series – powered by LCP Enact – we take a look at the IFA1 interconnector’s trip, how gas and renewables fared in August’s hot weather and how support measures for consumers around Europe have impacted baseload power prices for winter.
Day Ahead: Gas powers Britain through hot August
The day ahead price hit a high of £493/MWh last week on 6 September, and a low of £126.6/MWh on 8 September.
This was a drop from a high of £740/MWh on 30 August the previous week, which saw a low of £150/MWh on 4 September.
As such power prices have continued a downward trend over recent weeks, after the impact of the heat wave.
The warm weather in August meant much renewable energy generation was muted across the month. Statistics from National Grid ESO this week showed gas made up the bulk of generation across the month, account for 47.7%, followed by wind at 15.9% and nuclear at 15.1%.
Despite the relatively low contribution of wind and solar over a summer month, Britain continued to be a net exporter of electricity throughout August. It exported 3901GWh of electricity and imported 2001GWh.
The country becoming a net exporter of power has been a particular element of the energy crisis, as France struggles with nuclear power outages, along with the LNG market helping to lower wholesale prices in Britain beyond those of the mainland at various points.
Meanwhile day ahead prices saw a small bump due to an increase of gas prices, as Craig Miles, head of trading at Flexitricity explained.
“Day ahead electricity prices were supported on the back of gains in gas prices from Tuesday, 6 September, with base load prices reaching up to £325/MWh. However, this was short lived as NBP traded down to 170 p/th, from 360 p/th, earlier in the week.”
Intraday: Bearish impact around IFA1 interconnector trip short-lived
Intraday prices hit a high of £464.27/MWh on 5 September for last week, and a low of £140.99/MWh on 7 September. Like the day ahead prices, this was a further step down from last week’s prices, which saw a high of £591.77/MWh and a low of £151.32/MWh.
On Monday, attention swung from the higher wind generation of the previous week to the IFA1 interconnector, which saw an unplanned outage reduce available to zero before it returned to 500MW by Monday and then 1GW by Thursday 8 September.
“Monday last week saw the IFA1 interconnector trip at around 05:45 while exporting to France at 1GW. Following this trip IFA1 was unavailable to deliver exports scheduled at 1GW until 18:00,” said LCP Energy consultant Tim Sparks.
“Any bearish impact on prices was short-lived however, as wind and solar generation underperformed against their respective forecasts, which offset the reduction in transmission system demand arising from the IFA1 trip. This saw intraday (APX MID) prices track above the day-ahead level for most of period that IFA1 was unavailable.”
Imbalance: GB winter-22 baseload closed at £506.31/MWh
Imbalance prices hit a high of £587.02/MWh on 7 September, and a low of £80/MWh on 8 September. During the previous week, they hit a high of £719.87/MWh and a low of £0/MWh.
The relative calm and reduction in power prices comes as Britain and the rest of Europe continues to brace for a volatile winter.
“Recent gas price reductions and above average temperature forecasts have driven down electricity prices in the front month,” said Flexitricity’s Miles.
“The markets continue to assess the strength of the correlation between gas and electricity under extremely volatile conditions. Also, the emergence of working-day block 6 trade at near parity to the peak load, will be one to watch. From the generation side, the focus will be on the ramp up of CCGTs; Keadby 2, Coryton and Spalding are due to increase generation w/c 12 September.”
Along with the impact of gas prices on forward looking power prices over the last week, the range of support measures for consumers and businesses unveiled in Britain and the EU is boosting the market.
“Last week we also saw baseload forward prices for this winter retreating from the highs of the previous week,” added Sparks.
“Driving the bearish sentiment was anticipation of an announcement from the EU on policies to mitigate soaring energy prices. GB winter-22 baseload closed at £506.31/MWh, the lowest closing price for this contract since late July.”
On Thursday 8 September, newly appointed Prime Minister Liz Truss unveiled the Energy Price Guarantee, which freezes domestic energy bills at £2,500 for two years from October.
The move has been largely welcomed by the sector, with the hope it will help reduce the number of people falling into fuel poverty.
Whilst the final details of how the country will finance this £100 billion scheme are yet to be released, the government has ruled out a windfall tax on oil and gas majors.
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