• Most expensive UK day-ahead block products shifts to the middle-of-the-day period, away from the traditional evening period
• Low wind generation during demand peaks could keep the trend going
• Shift attributed to flatter evening peak profiles and lower solar generation
• Arrival of warmer weather would end the trend
Pricing of UK day-ahead block products took a twist during Week 18 as power delivered for 07:00 to 15:00 London time became the most expensive in response to a flatter evening peak and continued morning peak.
And the trend could continue over the next few weeks, particularly if low wind generation materialises during demand peaks, according to one source.
The average price of the Day-ahead WD3+WD4, covering 07:00 to 15:00, was £45.05/MWh on Wednesday and Thursday, according to trade data reported to ICIS. This was a 14% premium to average trade on the WD5 block [15:00 to 19:00] and a 4.5% premium to trade on the WD6 block [19:00 to 23:00], which averaged £43.05/MWh.
The shift in premium to the middle blocks of the day comes in response to a flatter evening peak profile, a continued breakfast peak and lower solar generation (see graph). Strong solar irradiation suppresses system demand during the afternoon.
The changing nature of the UK electricity market’s demand profile was referred to as the ‘duck curve’ by National Grid’s director of system operations Phil Sheppard.
This week’s price trend on day-ahead products could continue if low wind generation, which depresses wholesale prices, coincides with certain demand peaks, according to one trader at a supplier.
“If there is low wind in either early morning [breakfast peak] or evening in for the next few weeks, then I think this current trend we are seeing with premium parts of the day could continue,” he said.
However, once warmer weather arrives and depresses demand during the morning peak, the premium will disappear, the source added.
“Solar will start hammering the block 4 [11:00 to 15:00],” another trader at a supplier said.
Much of the shift in premium to the WD3+4 block was a result of a significant chunk of value being sliced off the WD6 block from April’s day-ahead settlements.
In April, a shift in the evening peak to beyond the traditional peakload period [07:00 to 19:00] caused the Day-ahead peakload premium over baseload to narrow and reverse on several occasions ( see EDEM 4 April 2017 ).
But the erosion of premium on the WD6 block is being assisted by a flatter evening peak demand profile as the traditional winter clash of lighting, heating and cooking demand separate.
“Lighting is still important but obviously lasts for a shorter duration and the switch-on of lights tends to happen after the evening peak so it doesn’t help to create spikes,” another source at a trading house said of the current demand profile.
In May 2016, trade on Day-ahead products followed a more conventional pattern with the WD3+4 period averaging £36.70/MWh, a traditional peak of £41.40/MWh occurring on WD5, and WD6 averaging £37.05/MWh.
But pricing of the day-ahead products is set to be more volatile this May. A reminder of April’s day-ahead price profile was served on Friday when trade on the Day-ahead WD6 averaged £52.00/MWh, a 12% premium to WD5 trade and a 22.5% premium to WD6 trade.
Cooler evening temperatures forecast for Monday and Tuesday were behind the return of the premium, the second supply trader said.
“I wouldn’t say that heating load is negligible this time of year,” he added, referring to temperature variations on power demand. email@example.com