The UK’s electricity system price spiked to £2,242/MWh last night (4 March 2020) following lower than expected wind generation during the evening peak.
Prices jumped to the £2,242/MWh mark during settlement period (SP) 37 (6-6:30pm), and remained high at £1,708/MWh during SP 38 (6:30-7pm).
The spike in system price is likely to have occurred due to wind generation being over forecast, according to Limejump’s head of trading and analytics, Rob Sherwood.
Wind was generating ~2GW at the time, 2GW less than had been forecast and 4.4GW less than it had been generating the day prior (3 March 2020).
Due to this scarcity in supply, National Grid called on its short term operating reserve (STOR), leading to system prices being calculated using the Loss of Load Probability (LOLP) and the Reserve Scarcity Price, currently set at £6,000/MWh.
The Reserve Scarcity Price is therefore divided by the Loss of load Probability, which was at 37% during SP 37, resulting in the system price surging over the £2,200 mark.
This system price calculation was put in place in November 2015, and last night’s spike being the first time the price has breached £2,000/MWh since its implementation, according to Paul Verrill, director of energy analysis firm EnAppSys.
Writing on LinkedIn, Emma Tribe, market advisor at Elexon – which administers the Balancing and Settlement Code and calculates the system price - confirmed that it was the highest price seen since 2001, with there being only nine Settlement Periods since 2001 where the price jumped over £1,000/MWh.
EnAppSys' Verrill confirmed that the spike was caused by "a period of tight supply and the calculation methodology used to determine system prices", like Sherwood suggesting that the "underlying cause for a high LOLP on initial review" appears to be low wind generation during the peak demand period coupled with a system expectation that wind generation would increase during the period.
“For those who have been hit by the high system price, questions will be asked about the calculation methodology and whether the probability of interruption was as high as the LOLP figures suggested,” Verrill added.
Whilst the low wind generation appears to be the biggest factor in the jump in price, Limejump's Sherwood said a factor was that demand was also close to the highest it's been this winter.
There was also no Triad incentive to bring on embedded generation due to the Triad period running November - February.
Sherwood added: “The UK already had all available remaining coal units on that could ramp in time and all CCGTs were on except Rye House (which was bought by National Grid). The UK’s continental interconnectors were already at full capacity importing 4GW.”
National Grid was buying in power from CCGT site Rye House at £125/MWh, before instructing fellow CCGT power station Peterborough to react as part of its STOR contract alongside another 81MW of non-Balancing Mechanism STOR, Sherwood said.
Prices fell back down to £23.35/MWh at 7:26pm, according to data from Drax Electric Insights, which monitors UK power generation and the system price.
The spike sent the average price of the day soaring to £122.89/MWh, however, with the average price for the previous Wednesday coming in at £33.59/MWh.
The night saw a wide range of prices, with system price falling to £0/MWh at around 7:45pm, just steering clear of dipping into negative pricing.
June 2019 also saw prices spike for over an hour, although they reached £375/MWh, following a run on coal generation units at both Ratcliffe and Burton.
Then in March, the system price dipped into negative pricing for over six hours, reaching as low as -£70.24/MWh following high levels of solar generation, which peaked at 7.7GW, above the forecast of 6.5GW.
The UK is currently seeing relatively regular periods of negative pricing, with 15 hour hourly periods in 2020 so far.
Limejump's Sherwood said that the aggregator will be “watching closely” to see if regular spikes in price like last night’s occur, and will be assessing the impact on the industry "as it strides towards decarbonisation and creates appropriate systems to manage our new energy mix".