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Current± Price Watch: Storage achieves £21.5m in Dynamic Containment in July

Image: Current±.

Image: Current±.

In the latest issue of our Current± Price Watch series – powered by LCP Enact – we take a look at how Dynamic Containment fared in July, the continued concerns over the impact of high wholesale prices over the coming winter, and how Britain’s support of the Lionesses caused a demand spike.

Day-ahead: Lioness victory drives 800MW demand spike

Day-ahead prices hit a high of £430/MWh on Thursday 28 July, and a low of £164/MWh on 25 July, in what was a relatively stable week for the market.

On Sunday evening, National Grid ESO reporting a spike in demand of 800MW at half time of the UEFA Women's EURO 2022 final. A record 17.4 million people tuned in on BBC One to watch the match, which saw the Lionesses beat Germany to win England’s first major trophy since 1966.

Demand spikes during major football matches are common, and an aspect of consumer behaviour National Grid ESO closely monitors. For example, during England’s victory over Germany during their UEFA EURO 2020, there was a 1GW pick-up in electricity demand at half-time, and around a 1.6GW pick-up after full-time.

Beyond football matches, other major UK events cause similar upticks in demand as the country moves on-mass to put the kettle on and open the fridge. In April 2020, there was a 950MW spike just after 8pm following the first ‘Clap for Carers’, with this demand met in part by battery software services provider Arenko, which delivered nearly 10% of the surge.

Intraday: Concerns over high pricing in winter continue to dominate discussion

Intraday prices too were more stable than the previous week during the heat wave, with a high of £423.16/MWh on 26 July and a low of £155.05/MWh on 30 July.

Despite the relative calm, concerns over winter supply and its impact on prices have continued in recent weeks, as wholesale prices have continued to increase. Flows on Nord Stream 1 – the pipeline that carries Russian gas to Europe – dropped to 20% of capacity last week, due to the need for urgent maintenance works according to Russia.

Such actions and their impact of wholesale prices have led to further increases in the predictions for energy bills for consumers over the coming winter.

BFY Group for example, has predicted that for Q4 22 and Q1 23, price caps could increase to £3,420 and £3,850 respectively. Meanwhile, energy giants Centrica and Shell both reported record high profits in H1 2022, due to the high commodity prices.

Image: BFY Group.
Image: BFY Group.

Ahead of the challenging winter, National Grid ESO last week released an early look at its Winter Outlook Report, warning of tight margins and highlighting a number of steps it has taken already to bolster its toolkit, including asking coal-fired generation to remain online and trialing domestic demand side response.

Imbalance: July sees £21.5million through the Dynamic Containment

Imbalance prices hit a high of £558.88/MWh and a low of £0/MWh, both on 26 July. The volatility in the wider energy market has continued to drive high prices for battery energy storage in particular over July, as it did in June when frequency service revenues hit record highs.

“Following on from last month's record high, storage has continued to achieve high revenue streams of £21.5million through the Dynamic Containment market in July, coming in a close second (June hit £22.9 million),” explained Shivam Malhotra, lead developer at LCP Enact.

“Despite an average 36% increase in the forecasted DC Low requirements, and a 13% increase in volume accepted, the average availability fee for DC Low dropped from £37.1/MWh to £29.8/MWh.

“With this decreased price, and NGESO dropping their FFR volume requirements post June from 550MW to 350MW, many optimisers opted to adjust strategies to add some additional focus on the Wholesale and Balancing markets.”

This shift proved advantageous to assets given the price spikes seen during the hot weather, he continued. For example, units such as the Habitat optimised Gresham House battery, Red Scar, managed to achieve high prices with offers accepted over £1000/MWh.

“Even with this, the units which topped our July leaderboard continued to be those getting the high-priced DC contracts,” finished Malhotra.

With such high prices and volatility, it’s an “exciting time” for all those involved or interested in the UK’s battery market, according to Limejump’s COO Tom Putney.

“Just take a look at June where we saw record breaking revenues with Dynamic Containment Low (DCL) with average clearing prices at £22.25/MWh. It is fair to say that July’s prices haven't been quite as high, however the drivers behind this are interesting,” he continued.

“During the summer months the market usually sees a higher requirement for Frequency Response from National Grid, with more renewables in the stack and less thermal stations, leading to lower inertia on the system. In June we saw the average requirement for DC tick up c.200 MW, giving an average Dynamic Containment Low requirement from National Grid of just over of 850MW. Interestingly, in July we saw a further increase of c.50MW, however, National Grid slashed the FFR requirement in EFA’s 5 and 6 from 550MW to 350MW.

"This led to a softening of Dynamic Containment prices as optimisers switched to it instead. We can see this in the data with average Dynamic Containment Low rejected volume more than doubling in July compared to June. Interestingly, at the tail end of July, FFR prices ended up rising over EFA blocks 5 and 6 with Dynamic Containment falling marginally to an average of £20.46/MWh. It’s fascinating how the movement of a few units between markets can have such an impact on prices.”

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