Power prices have spiked to a record level for this afternoon, as cold weather and low wind tighten margins again.
Between 17:00 and 18:00 GMT, the power price for the Nord Pool N2EX auction has hit 1000.04GBP/MWh, the highest hourly price seen on the auction.
This comes as wind generation is expected to dip to just 2.5GW, well below the normal level for January. Additionally, nuclear availability is lower than it was in early December, by about 0.5GW to 5.9GW, further tightening supply margins.
All this while temperatures remain low, at around 4-5 degrees below normal, noted energy tech company Limejump.
“We have seen Day Ahead market prices respond accordingly with the hourly EPEX and N2EX auctions clearing well into the £100/MWhs for the evening peak. Interestingly we saw the EPEX and N2EX auctions decouple significantly over the evening peak with N2EX reaching a high of £1000.04/MWh while EPEX went to £737.45/MWh,” the company expanded. “Auction decoupling is a result of Brexit whereby the EUphemia market coupling algorithm is not applied to the GB Day Ahead market.”
Prior to the end of the Brexit transition period on 31 December 2020, the GB power market took part in the EUphemia market (EU + Pan-European Hybrid Electricity Market Integration Algorithm), allowing easier trading between low cost power and high price areas.
Outside of the algorithm the strain of tight generation margins is felt more acutely. Yesterday (5 January 2021), National Grid ESO issued an Electricity Margin Notice (EMN) for the period between 16:00 and 19:00 as it was expecting a shortfall of 584MW.
While this was cancelled at 11:25 today, it is notable that this is the fourth EMN issued by the electricity system operator this winter as balancing the increasing amount of renewables continues to challenge the system and create price volatility.
National Grid ESO issued a capacity notice in December due to low temperatures and winds. Just a few days after this the same weather drove the Balancing Mechanism to hit £1,000/MWh and then power prices to spike to £720/MWh, including an unprecedented day-ahead clearing price for a Sunday of £350/MWh.
Before this similar conditions caused power prices to spike dramatically on the evening of 26 November, reaching over £300/MWh. This event also caused National Grid ESO to warn of tight margins.
VEST’s managing partner Aaron Lally warned that the underinvestment in battery storage in the UK has further led to more power market volatility.
“This market tightness has been masked since late 2016 due to warmer than seasonal weather and high renewable generation across Europe. During 2020, we have seen seasonal/cooler weather lead supply shortages and price spikes during March, September and Q4. We will see further events during January given the current weather pattern with the potential return of the 'Beast from the East'.
“During most tight days, the price spikes are concentrated across 2-3 hours. With battery storage at 2 hour duration and increasing, it makes these assets perfect for supplying power to meet these price spikes.”