High forward power prices and Carbon bounces back
Market Pulse
Low wind and a glimmer of solar set the backdrop to high system prices
The UK has been stuck in a spot of low pressure all week, with a few glimpses of sunny weather around the country. These sunny spells gave us an increase in solar generation, however, wind generation has remained low. For example, on Tuesday/Wednesday, wind performed at very low levels (around 1 GW) throughout the day, leading to a relativly tight power system. Most CCGT units were running at maximum export level. This meant that National Grid was mainly taking peakers in the BM – we saw System prices up to £140/MWh after solar generation dropped off. It has been a similar story all week, especially today as wind is low again (below 5GW) again this morning’s demand peak being higher than the expected resulting in system prices currently hitting £180MWh.
CCGTs and a number of flexible generation assets have been called upon to cover for the lack of solar & wind.
Restricted Gas flow into Europe leads to a surge in power prices
Gas prices have been on a rapid rise over the past fortnight. This is due to the fact that Europe is facing a tightening gas market, as supply levels are still below 5 year averages. This situation has brought about increased calls for the opening of Nord Stream 2, a massive gas pipeline from Russia to Europe. The Nord Stream 2 pipeline has been a diplomatic challenge throughout its construction, with concerns over the strategic Russia could have controlling gas flows into Europe. The USA, who have always been anti-Nord Stream 2, have recently softened their stance t. An interesting point to note recently,n has been the activity of Gazprom, due to the fact they could increase the flow of gas into Europe but are not. The Nord Stream 2 pipeline is essentially completed and ready to start pumping gas into Europe, but is not yet operational, it will be interesting to continue watching how this story will end.
Forward Power Price hits £90/MW and Carbon climbs
UKA’s (UK carbon units)and EUA’s (European carbon units) have both been on a rise this week after a period of decline. The UKA price has increased by £2.20/mt and the EUA’s by €3.78/mt. This has had a profound impact on forward power prices across the UK, with UK Baseload Winter-21 having increased by £7.45/MW since last Friday, hitting £90.70/MW today! This is great for our Limejump customers on the Track and Trace PPA product, as they are able to optimise when they lock in their power prices for periods in the future.
IMF recommends $75 carbon floor
The International Monetary Fund (IMF) has suggested that companies with high greenhouse gas emissions should be subject to a carbon price of $75 per tonne of carbon dioxide. A carbon floor price would mean that companies, including energy generators and heavy industries, would have to pay for the carbon they produce. At present, many countries and regions have their own carbon pricing systems with no globally agreed floor carbon price – The current UK Cost Constraint Mechanism sits at £10/below that. This bold move may cause a number of wider impacts such as raising cost of energy for low income families, trade could be impacted as countries with no floor price may offer cheaper alternatives for trade. Watch this space.