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'Extreme pricing' raising winter concerns as GB imbalance price soars to £4,000/MWh

Yesterday saw several power price records broken during a week of high prices in the GB market. Image: Getty

Yesterday saw several power price records broken during a week of high prices in the GB market. Image: Getty

Concerns over pricing as GB heads into the colder months are rising following numerous power price records being broken yesterday (9 September).

Prices in the Balancing Mechanism hit a record high of £4,037.80/MWh after a number of power stations priced themselves at £4,000/MWh, according to data from power market analyst EnAppSys.

The baseload imbalance price also broke records, hitting £960/MWh, three times the last record of £304/MWh set on 8 January 2021.

Additionally, traders struggled to buy volume in the intraday electricity exchange market, EnAppSys said, as the maximum price the platform allows is set at £3,000/MWh. At peak times, the imbalance price was over £4,000/MWh, with this resulting in the market being unable to react to the high prices, leaving traders “frustrated and unable to react to events and balance their requirements via the wholesale markets”, EnAppSys’ director Phil Hewitt said.

The high GB prices were coupled with similar stress in the Irish SEM market, where imbalance prices soared to €4,680/MWh in the evening peak as power was imported from neighbours in the GB island market through system operator trades between SONI/Eirgrid and National Grid ESO.

The high prices seen across GB and Ireland could result in further small supplier collapses, EnAppSys warned, with any suppliers that haven’t properly covered their requirements for their customers to be paying over the odds for electricity. The combination of some suppliers being late on their renewable payments and imbalance payments becoming due over the coming weeks could result in significant stresses.

Five small suppliers have gone bust in 2021 so far, the most recent of these being PfP Energy and MoneyPlus Energy. Over 20 have ceased trading since 2018, with 2020 alone seeing Yorkshire Energy, Tonik Energy, Effortless Energy and GnERGY go under.

Yesterday’s prices come as part of a week of high prices, with day-ahead auctions clearing at £731/MWh for Monday’s evening peak and baseload power prices also soaring.

This was largely caused by a shortage of generation, with nuclear not yet back online for the winter season and some CCGTs still offline. Low wind generation also played a factor in Monday’s prices, according to consultancy LCP, alongside reduced availability on the IFA1 interconnector.

“The final issue is that it is not yet winter and whilst there should be more generation online in time for the colder weather, it has to be a concern that a warm September week could create such extreme pricing,” Hewitt said.

“What are the potential risks for high prices and more stress in the winter months?”

This is not the first time in recent months concerns have been raised over the coming winter months, with National Grid ESO itself warning of tight margins due to supply uncertainty. 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.

It isn't just GB and Ireland that are seeing record-breaking prices, however. Prices across Europe have been high, with the average price of electricity in Spain and Portugal’s wholesale market breaking new records on four consecutive days last week, reaching an average of €140.23/MWh (£119.68/MWh ) on 2 September, data from market operator OMIE revealed.

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