In the latest issue of our Current± Price Watch series – powered by LCP Enact – we take a look at the record low strike prices achieved in the most recent Contracts for Difference auction, even as predictions for the next two price caps continue to surge.
Day-ahead: Offshore wind 70% cheaper over seven years
The day-ahead price hit a high of £350/MWh for the last week today (11 July), down slightly from its high last week of £373.77/MWh. It hit a low of £130/MWh yesterday, almost in line with the week before’s low of £127.2/MWh.
On Thursday 7 July, the winners of the fourth Contracts for Difference (CfD) auction round were announced, with wind and solar hitting record low auction prices. Offshore wind is now almost 70% cheaper than in the first allocation round in 2015, with a strike price of £37.35/MWh.
“It’s great news to see these contracts awarded to expand the supply of clean, domestic electricity generation while continuing to drive down the cost for customers,” Energy UK's deputy director of policy, Adam Berman said.
“With customer bills at record levels, and an urgent need to improve our own energy security, we need to move fast to meet the Government’s ambitious targets and reduce our dependence on volatile international gas prices.
“Enabling the rapid expansion required also means tackling existing barriers in the planning system and beyond so we can deliver the cheap, renewable projects that will bring down household bills without delay.”
Intraday: Strike prices ‘give hope’ amid surging price cap predictions
The APX MID intraday price hit a high of £366.29/MWh for last week yesterday (10 July), up from last week’s high of £308.01/MWh. Its low was also hit yesterday, when prices dipped to £0/MWh, down significantly from its low of £74.38/MWh last week.
While the industry has been celebrating the low strike prices achieved in the CfD auction, their impact on power prices are years down the line, with the first projects not set to come online till 2023/24.
Meanwhile, predictions for the coming price cap have again grown given continued volatility in the international gas market, with the next Default Tariff Price Cap set to be announced in August.
“With household energy bills set to top £3,000 this winter, the continuing falling prices of offshore wind in the recent CfD round gives us hope for the future,” said Sam Hollister, head of markets and engagement, LCP.
“Whilst these auction results won’t help near term energy bills, it does point to a future that is less reliant on internationally traded fossil fuels and where we can harness the power of the wind and sun at much lower cost. The Government’s upcoming Review of Electricity Market Arrangements will be crucial step in designing a market that ensures that the falling cost of renewable energy is passed through to consumers.”
Imbalance: Batteries continue to benefit from frequency events
The imbalance price also dipped to a low of £0/MWh yesterday (10 July), a drop from £56/MWh which was the low across multiple days last week.
Its high of £600/MWh was a significant jump from £420/MWh, the top price seen in the market last week.
Battery energy storage has continued to be the main winner from the high number of frequency events over the first weeks of July, on the back of batteries achieved the highest recorded revenue through Dynamic Containment to date in June.