UK Electricity Prices hit 22-Month High as Nation Shivers - and More is on the way

LONDON, November 29, 2010 /PRNewswire/ -- The wholesale electricity price for power to be delivered on Tuesday 30 November hit a 22-month high on Monday as the big freeze extended its hold on the UK into a second week.

Power to be delivered on Tuesday was traded on the UK power market at an early high of GBP67.00/megawatt hour (MWh). The last time it recorded a higher closing price was 8 January 2009, according to ICIS Heren historical data.

The country has had six major nuclear power plants out of action since 15 November which, coupled with continuous spikes in demand, has tested the nation's power generation capacity as heating is ramped up to fend off the big chill.

The six nuclear plants account for a combined power generation capacity of 3.3GW, with British demand on Monday expected to peak at more than 58GW. The UK has an installed power generation capacity of around 66GW according to National Grid.

Extreme cold weather in neighbouring markets has exacerbated the situation. The UK was exporting power to continental Europe through the 2-gigawatt (GW) UK-France interconnector cable early on Monday morning as French and UK power generators jostled to ensure consumption could be met.

"Energy desks have been scrambling to ensure that they hold enough power to cover demand over the coming days in a febrile trading environment, which has boosted prices," said ICIS Heren's UK electricity market analyst, Jamie Stewart. "The power system is coping, but the 22-month high is a reflection of just how tight the supply picture is so early into the winter."

And the situation is set to continue. The Met Office issued a severe weather warning covering the entire east coast of the UK on Monday, with the country set to shiver in sub-zero temperatures for the rest of the week.

By Friday, Scotland is expected to freeze as daytime temperatures plummet to minus eight degrees.

UK electricity suppliers buy their power at wholesale prices, so short-lived price spikes will not affect consumer prices directly. However, if wholesale prices stay high with stronger demand, this increase could feed through to retail prices.

The wholesale price hikes come at a time of heightened sensitivity around energy retail prices after British regulator Ofgem announced its intention to investigate competition in residential energy markets, following an estimated 38% increase in suppliers' profit margins.

Note to editors:

For the month so far, the UK Baseload price for power delivered during working days in November has averaged GBP45.14/MWh. Last year, the Baseload price for working days during November averaged GBP33.68/MWh, the maximum price during this period was GBP36.75/MWh on one day.

The UK-France interconnector allows up to 2GW of power to flow in either direction.

Interconnection between different electricity markets is an important part of EU policy, as it means that markets with excess generation can supply power to other markets.

The ability to import and export electricity is key to security of supply, both for the UK and other markets. Without interconnectors, each country would have to ensure that there was enough installed capacity built to cover the worst-case scenario.

The UK has a 450MW link between Scotland and Northern Ireland, and will connect to the Netherlands via the 1GW BritNed interconnector, due to become operational in April.

ICIS Heren is an information service provider for gas, liquefied natural gas, power, carbon and coal market intelligence. We publish a suite of tailored reports providing news, analysis, benchmark price assessments and indices. Through our reports we aim to bring liquidity and transparency to power and gas hubs, helping you analyse the sector and make informed business decisions.

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    Jamie Stewart
    Electricity Market Analyst
    ICIS Heren
    t: +44-20-7911-1933
    e: [email protected]
    http://www.icis.com/heren

SOURCE ICIS Heren