In this week’s edition of our Current± Price Watch series – powered by LCP Enact – we take a look at how a mild October has provided some welcome stability in power prices.
Day-Ahead: IFA1 trip cause price spike
Power prices over the last week have stayed within a narrower range than we’ve generally had this year, with the mild weather easing demand.
Day-Ahead prices hit a high of £230.2/MWh over the last week on 18 October, and a low of £44/MWh today (24 October).
Amidst the general calm, the IFA1 interconnector with France tripped at 22:44 on Monday 17 October while exporting 1GW – Britain is currently a net exporter of power.
“As a result, system frequency increased to 50.3Hz (returning to operational limits by 22:49) and system imbalance climbed to a high for the week of 2.5GW long for period 47 (commencing 23:00 on Monday),” said Tim Sparks, LCP Delta consultant.
“Intraday (APX MID) prices, which were already tracking at a significant discount to the day-ahead price level, took a dive in response to this additional system length to find a low for the week £12.95/MWh for period 47. This price level suggests there was an expectation of system prices going negative, however this did not materialise as period 47 instead went to £1/MWh.”
Intraday: Europe’s gas stores near capacity
Intraday prices were similarly subdued, with a high of £216.14/MWh on 21 October and a low of £11.65/MWh on 17 October.
Following the interconnector trip on Monday, “Intraday prices remained low through much of Tuesday, with a high level of solar generation helping to mitigate a lull in wind output and IFA1 not returning to full availability until around 18:00, at which point it resumed exporting at 1GW,” continued Sparks.
The price stability has been boosted by the fact Europe’s gas stores are nearing capacity. According to Reuters, as of 22 October 93.4% of EU gas storage is filled, which has had a calming effect on the market.
In Britain, the North Sea Transition Authority granted approval and consent to allow Centrica Offshore UK (COUK) to reopen its Rough gas storage site situated off the East Yorkshire coast in August, which provided a further buffer for the country.
Imbalance: Mild weather mitigate power price rises
While the interconnector trip on Monday 17 October had a significant price impact, imbalance prices have remained within a fairly narrow range over the last week. They hit a high of £413.3/MWh on 20 October, and a low of £0/MWh on 22 October.
Mild temperatures throughout October have been one of the largest reasons for the recent price stability. This has helped to keep the short-term gas supply picture positive for the time being, despite the relatively wet and windy weather.
Writing in a blog earlier this month, Professor Paul Davies Met Office Fellow (Meteorology) and chief meteorologist said that throughout November and December, weather is likely to be more settled than during October. High pressure settling over the Atlantic and the UK could increase the potential of cold snaps with some threat of snow and ice though.
“The most likely scenario as we head into 2023 is for the risk of high-pressure to decrease, and a return to more unsettled conditions with wet, windy, and mild spells possible,” continued Davies.
“However, there is still a risk we could see a Sudden Stratospheric Warming. If this happens it could potentially lead to a cold spell for the UK and northern Europe, although the chances of a very cold winter, comparable to 2009/10, are still low this winter.”
This cold weather could drive up the use of gas for heating in particular, straining the supply in the UK and other parts of Europe.
Therefore, while Britain is enjoying stability in power prices, it must still look ahead to the need for flexibility over the next couple of months and into 2023.