UK power for delivery over the weekend was trading at a ten-year high early on Friday, driven by the cost of firing up gas-fuelled power plants to meet demand amid very high UK gas prices.
ICIS assessed the UK power Weekend Baseload product at £80.00/MWh at Thursday’s close of the wholesale electricity market. This was roughly double the average power price for a weekend seen throughout 2017.
The highest single Weekend transaction seen on Thursday was for £81.00/MWh.
In early trade on Friday the same product had softened marginally to change hands at £77.00/MWh, but this remained comfortably the highest Weekend Baseload price since sharp price spikes were seen way back in 2008.
“The UK’s power generation system is capable of meeting demand with a mix of gas, coal, renewables and nuclear all producing power,” said ICIS power markets editor Jamie Stewart. “But this is coming at a very high price. This is because the wholesale cost of buying gas to fuel gas-fired power plants has been pushed to multi-year highs due to extreme demand and supply-side outages.”
Gas plants have occupied a marginal position in the UK power mix throughout the cold snap, meaning they have been ramping up and down to meet peaks and troughs in demand.
This is because high gas prices meant gas plants became more expensive to run than coal-fired plants. So while virtually all coal plants available to the power system have been running, gas plants have remained marginal.
The UK has seen vast amounts of wind power since the arrival of Storm Emma, which has supported the overall power system and kept supply margins well in check.
But wind power output is expected to fall back over the weekend, which will pull more expensive gas plants into the mix, and power prices have been forced higher to compensate.
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