New Stream Insight : 2021: Cold Weather Drives UK Power Prices Higher
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New Stream Insight : 2021: Cold Weather Drives UK Power Prices Higher
2021: Cold Weather Drives
UK Power Prices Higher
Commentary from Adam Green, Operations Manager at New Stream
UK Average Temperature °c
8 We have seen margins tighten with
6 renewable output low on wind, this
4 results in the need to run the more
Degrees
2 expensive thermal plants to increase
0 supply. Which in turn has pushed up
-2 prices on the day-ahead and intraday
-4
power markets. With the cold weather
forecast adding further risk premium
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to pricing.
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LNG (Liquified Natural Gas) European Energy Markets Are
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Gas is again supporting UK power
Prices Surge Also Tight
pricing. If you look at the weather The combination of a severe cold snap in Asia, supply German power hit 2-year high last week.
models it is uncertain how long the (liquefaction) outages and freight issues have spiked
N2EX Day Ahead Auction Price cold spell will last and it depends on a spot prices for LNG to historic highs. “Low availability from EDF’s nuclear fleet on the
1600.00 number of factors but we could see a back of maintenance will mean less or more
1400.00 return to cold in the coming days and 1. North Asia LNG pricing surged into the expensive power flowing from France to its
1200.00
some forecasts show that cold hanging $30 + range. neighbours.” added Charles Ward.
1000.00
around month end and into Feb. The
£/MWh
800.00
move up in pricing on Tuesday was 2. Increased power-generation demand in Asia as France has a much higher level of electric heating
600.00
extreme though effectively pricing in countries seeking to transition from coal. demand (limited gas supplies) than most other
400.00
cold for the whole of February. We European nations and demand is more sensitive to
“We heard of a Total-Trafigura deal done at $40.00
200.00
flagged this as a fixing opportunity for cold weather.
0.00
making that around £3 per therm. Then you look at
our PPA clients.
1/1/2021 1/3/2021 1/5/2021 1/7/2021 1/9/2021 1/11/2021 1/13/2021 the Henry Hub (US benchmark) at $2.70, it just puts
that level into context”. Ward said.
1. South Korea, China and India were all in the
market as buyers of February delivery shipments
“In the medium term we see strength in broader commodities and potential inflationary on higher-than-expected demand.
risks continuing to support markets. Oil, carbon and coal are all strong. LNG prices have
2. LNG traded on a spot basis is a relatively small
gone bonkers.”
part of the overall market because of long term
supply contracts and destination clauses.
Charlie Ward,
Head of Renewables
2 www.newstreamrenewables.com | Cold Weather Drives UK Power Prices Higher Jan 2021 3
PPA view
• UK gas pushing power higher.
• Domestic heating demand and colder weather
increasing demand.
UK Power Baseload S-21
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• The broader commodity market and carbon are
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being supported by positive vaccine news when we
44 look at the 12 month + time horizon.
“We see this a great fixing
42 • Lower wind speeds continue to support spot gas
opportunity for PPA and green
and power markets.
gas clients. Always difficult to 40
call the top of any market and 38 • LNG pricing is a key driver.
price volatility has made things 36 • Demand forecast remain robust in the face of
challenging but we see real 34
renewed pan European lockdowns.
value here. 32 • French nuclear generation issues that could have
implication across European energy markets
Nice to have such a positive 30
02/01/2020 02/02/2020 02/03/2020 02/04/2020 02/05/2020 02/06/2020 02/07/2020 02/08/2020 02/09/2020 02/10/2020
including the UK.
start to 2021 for renewable • Market priced risk premium for potential shocks as
generators. The cold weather move through winter.
and demand side picture is
again the key driver. We are
keeping our PPA and GPA
clients with upcoming renewals
updated in order to try and
System Demand
time best fixing.” 50000
45000
New Stream Summary PPA Recommendation :
40000
Jamie Banks, PPA Manager at 35000 New Stream are flagging market strength to both renewable power generators and
New Stream Renewables 30000
green gas exporters as a fixing opportunity.
MW
25000
20000
15000 New Stream are monitoring the market closely, running our analysis and making
recommendations to clients.
10000
5000
0
As always every client has slightly different requirements so we work with them on a
1/1/2021 1/2/2021 1/4/2021 1/6/2021 1/7/2021 1/9/2021 1/11/2021 1/12/2021 1/14/202 1
bespoke basis to find the best PPA solution.
4 www.newstreamrenewables.com | Cold Weather Drives UK Power Prices Higher Jan 2021 5
Carbon EUA Pricing 2020 ENERGY
HIGHLIGHTS
EUA Price
36 DEC 25th
35
First ever coal free Christmas Day electricity production
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Dec 18
EUR/tonne
Highest ever level of wind power (17.2GW)
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Aug 26
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Highest ever share of wind power (59.9%)
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16/12/2020 22/12/2020 28/12/2020 03/01/2021 09/01/2021
May 30
Highest ever share of solar power (34%)
May 24
• EUA prices climbed to fresh 2021 and all-time highs at just below €35. Lowest ever carbon intensity (46 gCO2/kWh)
• Possible consolidation and some profit taking after big move up.
May
Greenest month on record (143 gCO2/kWh)
• In the short-term, downside looks limited though.
• Carbon EUA traded up through €29. Apr 20
Highest ever level of solar power (9.7GW)
• Prices rallied as they tracked a sharp move up in wider financial markets
and bullish sentiment across European energy markets.
Apr 10 - Jun 16
Longest ever GB coal-free period
• EUAs have also caught a bit of a tailwind after the election of Joe Biden,
who seems set to prioritise climate change policy in his
Total coal-free hours: 5,147 hours
new administration.
6 www.newstreamrenewables.com | Cold Weather Drives UK Power Prices Higher Jan 2021 7
New Stream In Other News
Client Dashboard Low Carbon 2021
Britain’s power generation industry
is headed for its greenest year yet as
more renewable capacity is added
and coal plants are needed less
often.
The carbon intensity is a measure
of the environmental impact of
generating electricity - has dropped
60% in the U.K. in the six years
to 2019 and is on track to reach
another low this year, according to
data from National Grid Plc.
France Plans Huge Solar
Plant to Match
Capacity of One of
their Nuclear Reactors
The giant solar power plant in a pine
forest near Bordeaux has attracted
You can view more market data and live PPA and GPA
opposition from environmentalists.
pricing via our online client dashboard.
Plans to install the 1GW plant, which
www.newstreamrenewables.com will be the biggest in Europe.
If you would like to request access to this tool please email
francesca.reay@newstreamrenewables.com
Click here to contact Francesca
8 www.newstreamrenewables.com | Cold Weather Drives UK Power Prices Higher Jan 2021 9NEW STREAM RENEWABLES LTD 4 Charlecote Mews Staple Gardens Winchester SO23 8SR Tel: +44 (0) 1962 807 060 info@newstreamrenewables.com Since 2008 we have been involved in over 5GW of PPA power sales and route to market trading for a wide range of clients including institutional funds, private estates and local authorities.
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