By Rachel Morison and Anna Shiryaevskaya – Bloomberg
Electricity prices soared to a record in Britain as a period of still
weather is curbing wind power, exposing the U.K.’s reliance on intermittent
U.K. power for next day exceed 400 pounds ($553) a megawatt-hour at an
auction on Monday, an all-time high. Wind generation is currently below
normal, accounting for about 11% of all the electricity entering the grid.
That’s leaving the market exposed to swings at a time five nuclear units
are offline.
The U.K.’s ability to meet peak demand was already set to shrink this
winter as coal and nuclear power stations close early. The outlook has
worsened as low wind speeds have forced Britain to rely more on fossil
fuels to produce power at a time Europe is facing a shortage of gas and
coal prices are surging.
“It does feel that prices are overshooting,” Phil Hewitt, executive
director of industry consultant Enappsys Ltd. “Looking ahead, Wednesday and
Thursday look even more volatile compared to tomorrow, so we suspect that
this is not the end of the high prices for this week.”
Day-ahead power rose to a record 400.01 pounds (468.83 euros) a
megawatt-hour on the Epex Spot exchange, and 354.10 pounds on the N2EX
market operated by Nord Pool. That’s more than five times the average
day-ahead price during the past year on Epex.
The highest-priced hourly contract was a record 1,750 pounds from 7 p.m. to
8 p.m. London time on Tuesday on N2EX.
“It’s just like we are not receiving enough renewable production in the
U.K.,” said Ogan Kose, a managing director at Accenture. “The expected case
would be that renewable production would contribute up to 18-20% of overall
electricity generation, this is not happening at least nowadays.”
Prices are so volatile that Epex doubled the price cap for U.K. intraday
power to 6,000 pounds a megawatt-hour, according to a notice on Twitter.
The calm weather highlights the shortcomings of Britain’s growing reliance
on green energy at a time fossil fuels are also expensive. Wind generation
is set to be low this week before finally increasing on Friday, which means
“brutal” conditions for prices, according to Enappsys.
U.K. gas futures rose above 150 pence a therm for the first time ever. Low
storage levels in Europe and high prices across the U.S. and Asia are
driving prices to record levels, with shortages this winter looking
increasingly likely.
“Power prices are being driven by high gas prices but when prices start to
get really, really high, it’s being driven by scarcity, rather than just
the underlying cost of production,” said Marlon Dey, research lead for
Great Britain at Aurora Energy Research. “When we have scarcity events and
wholesale prices spike, the cost is going to go up for consumers.”
The U.K. is also struggling to count on its nuclear fleet, once a reliable
source of low carbon power around the clock. Electricite de France SA has
five nuclear units offline, removing about 3,000 megawatts from available
By 2024 five of the U.K.’s eight nuclear plants will be halted permanently.
While EDF is building a new atomic station, Hinkley Point C, that won’t be
generating until 2026. The government is in talks with EDF about financing
for a further station at Sizewell C.
Soaring power prices are also being driven higher by surging costs on
cross-border cables, or interconnectors, as competition to secure flows of
electricity increases, Enappsys said.

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