British Power Market to See More Negative Prices

Wind now represents a more substantial proportion of Great Britain's (GB) energy mix, while gas-fired power stations have to operate at lower load factors.

This has resulted in not only record low wholesale prices but a surge in negative pricing events where conventional generators have to pay to dispose of the excess, according to analysis by Cornwall Insight published April 21. 

Up until April 17 there had been 13 negative price events this year – two thirds of which occurred in April while much of the country was in lockdown, and industrial and commercial demand low. In 2019, there was only one negative day-ahead occurrence recorded in December (the first-ever recorded).

On top of this, the lowest ever day-ahead hourly price was observed April 5 at -£19.00/MWh. The average negative day-ahead hourly price in 2020 so far stands at -£4.42 /MWh.

Corwnall said there has been a rise in negatively priced periods on the within-day wholesale market. This is due to a greater sensitivity to short-term market drivers. The average negative market index price in 2020 has been -£12.09/MWh, the lowest of which was -£36.91/MWh on April 5.

"A rising number of negative pricing events across wholesale markets and imbalance prices has been expected due to the growing penetration of intermittent, subsidised, renewables plant on the system. However, the recent shock to demand amid the Covid-19 outbreak has perhaps brought us forward to what we might have expected to observe in the future when renewables make up a greater proportion of generation.

"We may see fewer negative priced periods as we head deeper into the summer months due to the eventual easing of social distancing measures and the lower expected wind output compared to spring. However, GB may face longer-term demand impacts due to an economic downturn as a result of Covid-19, which could impact next winter's prices," the consultancy said.