Energy prices update

Posted on November 22, 2017

Increased deployment of renewables is set to lead to greater electricity system volatility over the long term in both the UK and Germany.

A study from Bloomberg New Energy Finance commissioned by Eaton in partnership with the Renewable Energy Association (REA). The study examined the shape and scale of the flexibility challenge that will arise as the bulk of electricity generation shifts from coming from fossil fuels to more variable renewables.

The study advises that increased system volatility would create opportunities for “fast-ramping resources” because as wind and solar production fluctuates, flexible resources have to respond to balance them hour to hour.

It could that by 2030 there will be complete weeks where wind and solar generation exceeds total demand at some point each day, leading to a very challenging environment for baseload technologies, such as nuclear.

Price pressures

Market data from SSE shows pressures on energy market prices over the past week, with uneasiness around earlier forecasts for lower temperatures towards the end of November eased with new data on lower temperatures with working days trading down a penny compared to the close.

A cooler outlook for the UK and mainland Europe saw the Day ahead contract for Friday gain over a penny yesterday, with concern over rising demand amid the start of Norwegian maintenance, while bearish coal and oil contracts helped reduce movement along the curve.

Saudi Arabia observations that global over-supply will continue past the end of Q118 and IEA forecasts that escalating US shale production may hit 80% of the world’s supply in the next ten years overtaking Russia by 30% saw Brent crude lose 51¢ per barrel last week.

It dropped a price point to settle at $61.36/bbl, having been over $62 for the last week.

SSE says that non-daily metered demand was up again but a long system and forecast demand 14mcm below seasonal average provides a bearish outlook. December 2017 is down over 0.80p/th, with the Summer discounted by half that.

Headlines continued to affect prices along with operational interruptions, as political machinations in the Middle East and market analysis all had effects. By Friday, the January 2018 position had rallied by 50¢ margins on technicals as short positions following recent drops in prices were covered.

Near to far power prices came off on Thursday, as coal for Cal-18 shed $1.70/tonne, as well as the oil and gas drops.

UK wind generation is expected to rise next week and with it weighs on Week47 baseload by £0.80/MWh. Weather and the wider fuels mix contribute to a bearish NBP, with recognised implications for the power market.

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