An impressive week for renewable generation causes price crash
Renewable generation was the driving force behind market conditions this week with high levels of wind generation followed by high levels of solar. Over the weekend, wind ramped up to above 10GW, reaching as high as 14GW on Sunday. These high levels of wind resulted in National Grid bidding off up to 3GW of wind generation to manage the system. Similar to how low levels of generation cause price spikes such as those we saw in January 2021, high levels of generation can cause price crashes. On the 28th and 29th of March, there were 12 settlement periods where the System Price dropped below £0/MWh. Negative System Prices means that generators have to pay GBP/MWh for anything that is generated during that settlement period. This occurs when generation is too high and there is a risk of the frequency of the system reaching 50.5Hz, which is when the system becomes unstable. Day Ahead prices are also affected by high levels of generation, with prices dropping below £9/MWh at settlement period 9 on the 29th of March.
We witnessed strong solar performances for the first time this year, with generation reaching a peak of 7.5GW on Monday and Tuesday. Tuesday saw 56% of generation from zero carbon sources, 23% of which was generated from Solar. Due to this high renewable generation we have seen reasonably suppressed Day Ahead prices this week.
Carbon price rose by €1.50/tonne this week, whilst the UK Baseload Summer 21 remains above £55/MWh despite dropping by 90p. Gas prices continue to climbthis week, moving up to 49p on the 31st of March. This is due to a tighter fundamental picture, lower Liquid Natural Gas flows into Europe coupled with temperature forecasts well below seasonal temperatures at the start of next week.
Outlook for next week
Forecasts suggest that we will experience temperatures below seasonal norms, dropping well into single figures on Monday and Tuesday. However, we also expect to have a very strong power supply. Wind generation is expected to be close to 15GW on Sunday evening, which coupled with lower demand over the bank holiday weekend creates a risk of very low or even negative system prices. Wind generation continues to stay strong for most of the week, with a slight dip on Wednesday.