UK nuclear maintenance adds to late November power supply risk

An increased UK nuclear maintenance schedule in the second half of November is assisting premium on UK front month products following recent French-led bullishness.

It could lead to a situation where prompt deliveries in the first half of November are cheaper than the front month expiry before more expensive settlements follow in the second half of the month.

A similar trend was observed in September. During the first fortnight of that month, day-ahead baseload settlements averaged 4.5% below the expiry of the September ’17 Baseload at £48.63/MWh. Day-ahead deliveries for the rest of the month were on average almost flat to the September expiry.

Nuclear maintenance during November will be dominated by an outage on both units at EDF’s 1.25GW Sizewell B power station, which is scheduled to last from 3 November until week 49 in December, according to EDF remit data.

Availability will drop progressively throughout November from just under 8GW at the start of the month to below 7GW from 19 November to the end of the month. Full nuclear availability amounts to approximately 9GW in the UK.

Scepticism over November premium

“There’s no doubt that the French market is nervous about November,” one trader at an energy procurement company said. “I don’t necessarily think that [nervousness] is warranted in the UK.”

He was optimistic that maintenance on French nuclear units would not be as heavy as others in the market appear to be fearful of.

Value on the front month also looked excessive to another source at a supplier, who believes there is room for the contract to fall based on current fundamentals.

Concerns around French nuclear availability in November have fed bullish movements on the UK near curve in recent sessions. This has been reflected in growing risk premium on the UK November, with both the baseload and peakload products at respective 4% and 9% premiums to equivalent Q1 ’18 contracts at Thursday’s close.

The dirty spark spread for November has also risen steeply in the last week, indicating an increased widening of risk premium between the respective power and NBP natural gas contracts (see graph).

Planned French nuclear availability throughout November stands at 84%, up from the current level of availability at 63%. However, French traders fear that recent extensions to current nuclear outages are ominous for November’s availability outlook.

Supply margins are forecast to drop slightly towards the end of November but remain wide enough to indicate the UK power system is comfortably supplied despite the nuclear maintenance schedule.

Excess supply during the peak half-hour of demand until the week ending 19 November is forecast to average just over 10GW, according to National Grid data. This is considerably above supply margin forecasts throughout September. Supply margins are then forecast just above 8.5GW for the remainder of the month. This would be sufficient to keep much of the country’s least-efficient and costliest plant off the system. henry.evans@icis.com