U.K. Power Supply Crunch Sends Prices to Record High
(Bloomberg) -- Britain is set for more sky-high power prices after surging to a record as supplies plunged, an early signal of what might come this winter.
National Grid Plc has warned that the buffer needed to keep the lights on will shrink this heating season. It called for two coal-fired generators to be turned on Monday and it’s not even cold yet.
Last winter, the tightest since 2016, was characterized by a spate of market warnings, with the network manager regularly calling on utilities and generators to switch on plants with very short notice.
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The jump in U.K. day-ahead rates to a record high on Monday is just the latest example in the wider rally in everything from electricity to natural gas and carbon permits. With less than a month to go until the heating season starts, utilities are raising prices across Europe in a blow for millions of consumers and businesses.
“We’re experiencing a bit of a perfect storm at the moment,” said Rajiv Gogna, a partner at Lane Clark and Peacock LLP. “We’re still exiting the summer period, with a number of summer outages across the gas fleet further reducing availability, and the global increase in gas and carbon prices continuing to apply upward pressure on prices.”
Margins in the U.K. power market are “currently forecast to be sufficient for the coming week,” a National Grid spokesperson said by email. The average price for Tuesday dropped 15% from Monday’s record in the N2EX exchange day-ahead auction.
Even so, the market is still trading near a record high with contracts for Tuesday settling at the third-highest level in history, while intraday prices for certain periods on Monday climbed to 550 pounds ($761) a megawatt-hour on N2EX.
- This chart shows U.K. wind output dropping below 1 gigawatt on Monday:
The U.K. is getting increasingly reliant on imported energy and the market is struggling to attract cargoes of liquefied natural gas when prices are soaring everywhere. On top of that, Electricite de France SA delayed the start of two U.K. reactors previously scheduled to start this weekend. While the Heysham 1.2 reactor restarted Monday, the Heysham 1.1 unit is due to come online Tuesday, according to filings on the company’s website.
While wind power is getting more important for the nation’s power supplies, its contribution varies widely. Output dropped to as low as 409 megawatts on Monday, compared with a record of 14,286 megawatts set on May 21.
National Grid asked EDF to fire up two coal-fired units at the West Burton A station. Both units were generating at 8 a.m. London time, grid data show. The U.K. has plans to phase out coal by 2024, but in the interim is reliant on these units when margins are tight.
“The U.K.’s exposure to volatile global gas prices underscores the importance of our plan to build a robust domestic renewable energy sector to further reduce our reliance on fossil fuels,” a spokesperson for the U.K.’s Department of Business, Energy and Industrial Strategy said. “The best way for consumers to keep energy bills down is to shop around for the cheapest tariffs on the market.”
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U.K. day-ahead power for Tuesday dropped to 187.38 pounds a megawatt-hour, down from the record 219.46 pounds for Monday on N2EX. The average price for the evening peak on Monday was 731 pounds, the highest since January, Enappsys data show.
The picture looks similar in Germany, with wind output set to drop as low as 752 megawatts on Tuesday, compared with a record of 46,846 megawatts set on Jan 21. The German day-ahead rate was little changed at 127.98 euros, the highest level since October 2008 on Epex. The French equivalent dipped 0.2% to 123.69 euros on the same exchange.
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