Energy Wholesale Market Review, 21 September 2018

Baseload electricity

• Day-ahead power increased 5.2% week-on-week to £70.0/MWh.
• Prices fell to a one-month low of £61.0/MWh on 18 September amid forecasts of higher wind generation.
• October 18 and November 18 power rose, gaining 4.3% and 3.1% to £70.1/MWh and £73.6/MWh respectively.

• The annual October 18 power contract gained 2.7% to end the week at £67.2/MWh (up from £65.4/MWh).
• The contract is £4.6/MWh (7.3%) higher than the same period last month, and 54.5% above the same time last year when it was £43.5/MWh.

Forward curve comparison

Annual October Contract

Peak electricity

• Day-ahead peak power reversed the previous week’s decline, rising 3.5% week-on-week to £73.0/MWh. This was £3.5/MWh above its baseload counterpart.
• Month-ahead peak power went up 4.4% to end the week at £75.4/MWh, £5.3/MWh above its baseload counterpart.

• Week-on-week, annual October 18 peak power rose 1.8% to £72.4/MWh. The contract is £5.2/MWh above its baseload power counterpart.
• The contract was 6.5% above its price last month (£68.0/MWh) and 47.3% higher than its value last year (£49.1/MWh).

Forward curve comparison

Annual October Contract

Seasonal power prices

Seasonal baseload power contracts

Seasonal baseload power curve

• Week-on-week, seasonal contracts were up 2.1% on average. Winter 18 power ended the week at £73.7/MWh (up 3.2% from the previous week).

• All seasonal peak power contracts increased last week, up 2.1% on average. Prices followed an increase in gas prices.

Commodity price movements

Oil and Coal

Carbon

• The weekly average Brent crude oil price rose for the fifth consecutive week, gaining 1.2% to average $79.1/bl, up from $78.2/bl.
• Prices have been supported by the upcoming US sanctions on Iran.
• The market has also been looking at the OPEC and non-OPEC coalition meeting in Algiers on 22-23 September, which aims to discuss how the group will mitigate the losses from Iran.
• API 2 coal rose 0.9% to average $96.7/t last week.
• Demand has grown in Europe following the recent record highs in wholesale gas prices across the continent, resulting in record high stockpiles at the Amsterdam-Rotterdam-Antwerp hub.

• Average EU ETS carbon prices fell for the first time in 13 weeks, dropping 8.7% to €21.2/t, down from €23.2/t the previous week.
• Despite carbon prices having more than tripled in the last year, experts believe the current price is still too low to encourage a rapid switch from coal to gas.
• Secretary general of gas association Cedigaz, Geoffroy Hureau, said last week that a carbon price of between €22.0-€45.0/t is required to encourage the switch to gas, and anything higher could drive a preference towards renewables.
• A third British EUA auction failed on 19 September following a lack of successful bidders as 12 bidders placed bids for 5.0mn of the 5.7mn EUAs available.

Wholesale price snapshot