Market Pulse
Last week began like many previous weeks so far this winter period. Concerns surrounding the commissioning of Nordpool 2 saw a power and gas price increase. This was a result of an announcement from the German Foreign Minister saying Nord Stream 2 is still in no position to be approved due to its continued non-compliance with EU law. However, the main event in the forward market has been power led. On Thursday it was announced that four French nuclear plants had their return dates pushed back to April, removing 3GW of power. This affects the UK as these interconnectors usually provide the UK with 2GW of energy, however, this support is no longer guaranteed. When this occurs, not only does the UK not receive an additional 2GW of supply but the flow switches and we start exporting to France resulting in a 4GW swing. During the winter period, when de-rated margins can already drop threateningly low, these drivers could have serious implications during times of low wind across the UK and France. As a result, we saw the market record its highest ever day on day spike, increasing by £78/MWh between Thursday and Friday and sat at an all-time high of £385/MWh as of Friday. Front-month power prices are even higher, trading at a staggering £470/MWh on Friday.
The market also witnessed the carbon credit market make a drastic move, dropping significantly. Commentators suggest that this is the market correcting itself following what seemed like an unrelenting charge, with new record prices set for UKA’s and EUA’s. UKA Spot prices reached £79/mt before dropping to £75/mt. This drop is particularly interesting because it follows the news that the government has decided no intervention is required following the Cost Containment Mechanism being triggered.
It was a lively prompt market towards the end of last week with a sudden crash in wind on Thursday and Friday. Wind dropped from 10GW to as low as 0.5GW on Friday and resulted in very bullish activity. This is because we saw the de-rated margin drop to just above 1GW and as a result, Day Ahead prices spiked to £1,500/MWh and £1,451/MWh on Thursday and Friday’s evening peak respectively. These low winds have carried into the early part of this week and we are seeing Monday and Tuesday’s Day Ahead prices reach £1,250/MWh and £761/MWh respectively, slightly suppressed comparatively due to higher de-rated margins despite lower winds.