UK power Day-ahead soars to multi-year high

Eugene Poon

05-Jan-2021

LONDON (ICIS)–The UK wholesale power Day-ahead settled at £147/MWh for 6 January baseload delivery and £230/MWh during peak hours, according to over-the-counter trades reported to ICIS. These are both the most expensive Day-ahead prices since all-time highs recorded on 7 November 2016.

Later on 5 January, transmission system operator (TSO) National Grid issued an electricity margin notice signalling a shortfall of 584MW in its preferred supply-demand margin for 16:00-19:00 London time the following day, requesting additional supply or demand-side response to compensate. The TSO will issue an update at 10:00 on 6 January.

The bullish fundamentals driving the prompt are likely to start to subside from the weekend.

National Grid initially announced on 4 January that they were forecasting tight system margins later in the week, driven by a combination of undersupply from low winds and high demand from low temperatures.

The TSO on 5 January forecast UK wind output averaging just 3.1GW across the following day, compared to 8.5GW generated across January 2020.

UK temperatures have dropped to an average of 2.9˚C below normal since 25 December, with the cold spell set to continue through the remainder of this week.

Meanwhile, imports from the continent remain constrained by an unplanned outage taking the 1GW BritNed interconnector with the Netherlands offline on 8 December. Transparency data showed an estimated return to service at the end of January.

The startup of the 1GW IFA2 interconnector, bringing cross-border capacity with France up to 3GW, has been delayed from November to “sometime in the first quarter of 2021.”

The Belgian power day ahead for 6 January flipped to a wide premium to France on the EPEX SPOT exchange, with exports along the Nemolink with the UK set to reach full capacity of 1GW during most peak hours.

National Grid forecast UK wind output dropping again to 3.3GW on Friday, but then rising to 6.7GW across the second week of the year.

Forecaster MetDesk on 5 January indicated UK temperatures rising above normal in week two, and above-normal anomalies generally persisting into February, although more doubt is attached to longer-range forecasts.

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