Rachel Morison, Will Mathis
A spell of cold temperatures last week revealed a mismatch between the
U.K.’s goal to decarbonize and actions taken in order to keep the lights on.
Low wind output was a factor that caused the narrowing of margins between
supply and demand of electricity according to National Grid Plc. Instead of
using the cheap wind generation available, on the afternoon of Jan. 6, one
of the U.K. biggest wind farms switched off, while National Grid paid an
Electricite de France SA gas plant 3,000 pounds ($4,071) per megawatt-hour
to produce power.
The actions show the difficulties of delivering ambitious climate policies
as well as preventing blackouts. That said, Britain’s power system is
getting cleaner. Last year was the greenest year on record according to the
network operator. For every kilowatt-hour of electricity the U.K.
generates, it now produces 60% fewer carbon emissions than 2013.
As more parts of the economy electrify, utilities and trading houses are
expanding to find an edge in Europe’s $430 billion power market. Last
week’s activity shows that trading can come at the expense of what’s best
for the climate. National Grid takes these decisions in the balancing
market, a part of the power system where the grid operator fine-tunes
supply and demand.
The cost of balancing the power system jumped last year as the pandemic hit
demand – now it’s struggling with low wind, outages at nuclear plants and a
prolonged cold snap.
“In the future prices will become more extreme at certain points – either
super-high prices like last week or super-low prices when renewables are
running at maximum output,” said Phil Hewitt, director of Enappsys Ltd.
In the balancing market, generation that isn’t already running can offer
its output into the market or get paid to switch off. National Grid tries
to find the most economic way to get what it needs to keep the system
balanced, a spokesperson for the company said.
Separately there was low availability from EDF’s nuclear fleet including a
unit at Heysham-1 that was due to return to the grid last week but didn’t
switch on. That helped create conditions that allowed EDF to secure the
high price granted to its gas plant.
Wind farms can also be asked to turn down when a surge of electricity
threatens to overwhelm the grid. However, that wasn’t the case with SSE
Plc’s 588-megawatt Beatrice wind farm on Jan. 6.
The site, one of the country’s biggest offshore wind farms and capable of
powering about 450,000 homes, has a so-called contract for difference to
sell power for about 162 pounds per megawatt hour, about four times the
average market price for power. If the market price for power goes above
the contract price, then the wind farm owner is meant to pay the difference
back.
The contracts, which are a government subsidy, were critical to scale up
the offshore wind industry by giving developers certainty while also
cutting costs for consumers. The idea is that once wind farms are cheap
enough, they won’t need support.
But last week showed that the contracts won’t always work as planned.
Day-ahead power traded for Wednesday evening surged to 1,000pounds per
megawatt hour. If the Beatrice wind farm sold power then, it would have to
pay back 837 pounds per hour for every unit of electricity produced.
Instead, Beatrice made a deal with the grid. It paid a price to not produce
any electricity. That effectively removed the wind farm from its
contractual obligation and so could make money at the higher price.
An SSE spokesperson declined to comment.
After allowing SSE to turn off Beatrice, National Grid paid EDF to fire up
its West Burton B gas plant. On Jan. 8 the same gas plant earned 4,000
pounds a megawatt-hour for two units.
Balancing prices are usually higher than those in the market and ultimately
the consumer pays these costs.
“To meet our emission goals we need to be considering the carbon impact of
these actions as well as the cost of supply,” Adam Lewis, a partner at
Hartree Solutions said in a report. A system that “favors keeping prices
down over carbon intensity and can act as a handbrake on the U.K.’s success

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