Following on from a more turbulent few weeks caracterised by record high temperatures straining the energy system and surging Dynamic Containment prices, power prices in Britain’s energy sector have levelled off over the last week.
In the latest issue of our Current± Price Watch series – powered by LCP Enact – we take a look at how the generation mix is changing with the closure of another nuclear power plant and growth of renewable energy.
Day-ahead: Hinkley Point B closes after 46 years
Local day ahead prices hit a high of £408.5/MWh over the last week on 8 August, and a low of £178/MWh on 7 August.
Britain’s nuclear fleet took a hit last week as after more than 46 years, EDF’s Hinkley Point B switched off its second reactor.
Mike Davies, station director of Hinkley Point B, said: “This is a day of mixed emotions for all of us. We are justifiably proud of everything this station and its workforce have given to Somerset, and indeed the country, over decades of operations. The huge amount of electricity we’ve produced could have met the needs of every home in the South West for 33 years.
“There is much to be proud of. This tiny corner of Somerset has produced huge amounts of zero-carbon electricity, supported and enriched our community and helped sustain the South West nuclear sector by providing thousands well-paid, high skilled jobs to our community.
Intraday: Renewable growth continues to storm ahead
The APX Mid intraday prices hit a high of £424.16/MWh on 1 August, and a low of £137.47/MWh on 2 August.
All of the 93 projects to be awarded contacts within Allocation Round 4 of the Contracts for Difference took a step forwards, as Low Carbon Contracts Company reported that all of the contracts had been signed and returned.
Research from analytics company the Energy and Climate Intelligence Unit (ECIU), has suggested that the high wholesale gas prices mean CfD supported projects are now predicted to pay back £25 this winter, and around £45 a year to each household from next winter, further highlighting the value of supporting renewables.
Jess Ralston, senior analyst at ECIU, said: “With the high gas price pushing up the average energy bill by at least £2,000 this wind power saving is modest, but with gas prices predicted to stay high for many years, we are reaching the turning point where renewables subsidise bills rather than the other way around.”
Whilst low-cost renewables will play a key-role in managing volatility driven by the international gas market in the future, key changes are needed to modernise the system to allow it to truly take advantage of these. To support this, two key publications have been released in recent weeks.
“Whilst the country waits for a new Prime Minster, the Department for Business, Energy and Industrial Strategy (BEIS) have put out two publications of strategic importance using LCP analysis and modelling,” said Sam Hollister, head of market insight at LCP.
“The wide ranging Review of Electricity Market Arrangements is looking at fundamental change to the operation and investment signals across electricity and is built on LCP’s modelling for the case for change.
“Meanwhile, the Government, using modelling provided by LCP, has published its Electricity networks strategic framework setting out actions the Government and Ofgem are taking to ensure the electricity network can act as an enabler of a secure, resilient, net zero energy system.”
Imbalance: National Grid issues emergency instruction
The imbalance price hit a high of £527.37/MWh on 3 August, and a low of £0/MWh on 5 August.
Like the day ahead and intraday prices, there was relative stability in the market over the last week. One minor point of note is that National Grid issued an emergency instruction to a Balancing Mechanism participant on 6 August at 22:06, which was cancelled 45 minutes after.
With the growth of the ancillary market, batteries are continuing to benefit from strong demand across Dynamic Containment, Moderation and Regulation.
“All the key drivers are looking positive for all battery storage assets right now, but for us in particular it is really encouraging to see the value of the two-hour battery showing through in the numbers,” said to Paul Mason, managing director of Harmony Energy Income Trust.
The company works on the basis that when the ancillary services market starts to reduce in value, it can trade in the wholesale and Balancing Markets more successfully that battery assets with shorter-duration battery assets.
“Most recently this has been driven by the introduction of Dynamic Regulation (“DR”), the first of the Dynamic Suite of products to really reward battery duration. This is still quite a new service and is under-supplied (not least because there are only a handful of two-hour batteries which can effectively operate in this market), so this has helped keep pricing high compared to Dynamic Containment (“DC”),” continued Mason.
“On top of this high pricing, we’ve seen the role of the optimiser come to fore a little bit more, with divergent strategies around stacking DR, DC and wholesale markets. Moving between periods of symmetrical DC (both high and low) and the simultaneous stacking of DR high and wholesale exports was a particularly successful strategy for Harmony’s existing assets (owned in Joint Venture with FRV and not part of Harmony Energy Income Trust’s portfolio) in June and July and this performance looks to be tracking through to August as well.”
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