Posted on: 03/08/2018
Solar generation hit an all-time high during the last week in June, providing a record breaking 533GWh. With continued record-breaking temperatures, clear blue skies and plenty more sunshine forecast for the foreseeable summer, Chris Smith, Head of Renewables, explains the Power market trends we have seen over recent months. Looking further at what this means for solar generators in the UK if we continue to experience extended heatwaves like this year-on-year.
This year has seen temperatures climb across the country, in what is being considered the longest heatwave in 42 years.
With climate scientists predicting heatwaves to increase in the future, how will this affect our energy mix?
Wind power has slumped over the past few months with 40% less output than normally predicted at this time of year, along with our rivers running dry causing hydro power to provide 33% less output over June.
There have been positive stories to come out of the heatwave as well.
The surge in solar power generation is one of them, on 30 June 2018, solar power contributed to nearly 28% of the electricity output at mid-day, a period which sees price spikes in the Day Ahead hourly market linked to an uptake in demand over the lunch time period.
Day Ahead Market shift
The Day ahead market which is the most liquid exchange in the UK and follows supply and demand of Power has continued to show lower prices between 10am-12pm and 2pm-4pm, outside of the morning rush hours, lunch time and lights on price periods.
These lower prices are generally caused by solar generation which has zero marginal cost. Generating in low demand times and contributing a greater percentage of total power generation stack.
In other European markets with greater solar penetration, we see regularly negative prices during these lower demand periods.
This pattern has continued this year however, as we have seen prices levels much higher than usual as you can see from the graph below, the power price development shape has remained the same as previous years, but prices are as much as £18MWh more than previous years.
Key factors include:
1. The Carbon Price rising, which has affected gas production prices
2. Low wind production lowering available supply
3. Poor levels of hydro generation from the Nordics
These factors have been creating lucrative Day Ahead prices for large generators that can access this market, such as large solar and flexible assets, such as gas peakers, batteries, etc.
Heatwaves predicted to increase
With more intense heatwaves predicted for the future, along with more renewables in our energy mix, we are predicting to see these abnormal trends become the norm.
Volatility in the short-term markets will become more frequent as we move away from traditional baseload generators such as coal to decentralised intermittent renewable generation, which is why it is important to create and maintain a wide mix of energy sources.
I present quarterly webinars that cover generation forecasts, which take an in-depth look revenue streams across the entire renewable electricity spectrum. If you would like to find out more about future generator revenue streams, sign up for our next webinar here on Wednesday 12th September 2018 at 11am.
The future is looking positive for generators and those with flexible assets. We have also just recently launched our new business unit Asset Optimisation focussing on offering businesses the chance to take a more active approach to managing their energy bills.
Contact us today to find out about the N2EX and what it can offer your assets.
About the author
Chris joined SmartestEnergy’s Renewables team in 2017 from Danish energy trading company Neas Energy. He works with generators to develop solutions to help them maximise returns in a changing environment for renewable projects. Chris began his career in the energy sector in 1996 with Eastern Natural Gas. He went on to work as a Generation Services Senior Business Development Manager at RWE npower, developing PPA solutions for customers. He has also worked on the supply side with industrial and commercial users. His role as Business Development Manager at Neas saw him build its UK PPA and CHP portfolio from market entry. Chris has a BA in Business Studies from De Montfort University, Leicester.