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Power prices spike to record highs amidst ‘perfect shoulder month storm'

A shortage of generation across the board has driven power prices up in Britain. Image: Getty.

A shortage of generation across the board has driven power prices up in Britain. Image: Getty.

Power prices in Britain have spiked dramatically, with day-ahead auctions clearing at £731/MWh for today's evening peak amidst what industry analysts have labelled a "perfect shoulder month storm".

Today’s (6 September 2021) baseload power price has reached a record high of £230/MWh, while power market analyst EnAppSys has noted also noted that the weighted average price in EPEX and N2EX markets for 18:00 today is the highest since 15 January 2021.

"The high prices have been caused by a shortage of generation,” said Phil Hewitt, director at EnAppSys. “Nuclear plants are not all back online for the winter season yet, and three units at Heysham are due to come back over the next two weeks.

“This combined with the some CCGTs still offline, Calon units still being mothballed, Drax coal units not participating today, low wind and high gas and carbon prices have resulted in a perfect shoulder month storm."

Wind generation is exceptionally low added consultancy LCP – producing just 3% of the maximum wind generation Britain’s power market has seen in the last 12 months. There is also reduced availability on the IFA1 interconnector, which has further contributed to tight market conditions and corresponding high prices.

“We’ve already seen near £5000/MWh prices taken this morning so we may see more records broken this afternoon,” suggested Rajiv Gogna, partner at LCP.

“While assets will return from outage over winter, we will see temperatures drop, solar output decrease and demand increase, so the system will continue to be very tight and we are likely to see at least these levels again over the coming months.”

Power prices in the UK hit record highs in January 2021 as low winds and a cold snap created challenging conditions. The day ahead N2EX margin jumped to £1,499.62/MWh for 17:00 on 12 January, as National Grid ESO was forced to issue a number of Electricity Margin Notices (EMNs).

The imbalance price also hit record highs in during the period, reaching £4,000/MWh between 19:30 and 20:30 on Friday 8 January. Imbalance prices reached or exceeded £1,000/MWh on seven occasions from 6 - 8 January due to cold weather brought on from the so-called ‘Beast from the East 2’ weather event, according to Elexon.

Following this challenging period, National Grid ESO has already warned of tight margins due to supply uncertainty in the coming winter. It released an early view of its winter outlook in July, showing a base case de-rated margin of between 3.1-5.4GW or 5.3-9% due to potential variation on available capacity.

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