monthly HEADLINES
  • Large-scale post subsidy solar pipeline soars 67% in just 6 months in the UK. The rise has been driven by a combination of reduced technology costs and the return of established developers, experienced with the UK solar planning process. The total forecast capacity currently stands at 4.2GW with build-outs likely to take place during 2020-2022.
  • National Grid has confirmed the Winter 18/19 Triad periods; 22nd November (17:00-17:30), 10th December (17:00-17:30) and 23rd January (17:30-18:00). For generators receiving Triad payments over the next couple of months, Carter Jonas can check that your energy supplier has paid you correctly.
  • UK energy prices continued to trend downwards in March, falling 6%. Healthy gas levels and high renewable generation boosted supply while demand dropped below seasonal norms. The PPA market followed suit and Carter Jonas will be monitoring markets and getting in touch with clients to advise accordingly regarding upcoming renewals.

Industry News

Short-term energy markets continued to tumble in March particularly through the first half of the month as windy conditions and mild temperatures boosted supply and demand plummeted. Prices have continued to drop over the last couple of weeks due to continued unseasonably warm conditions and healthy solar output, however a reduction in wind output limited gains. Day-ahead prices fell beneath £43.5 MWh, close to an 18-month low.

Longer term prices had a slightly more volatile month but ultimately fell on the downtrends in gas and coal prices. Coal dropped below $75/tonne, its lowest level since last March on the back of reduced Chinese buying and economic slowdown fears. While oil markets have had a more bullish month with prices increasing above $67/barrel – a four-month high - which limited losses.  

The last weekend of March saw an “unprecedented” shift in demand and supply patterns which sent the UK wholesale power price tumbling into negative pricing for more than six consecutive hours. Lower than forecasted demand and high renewable output, particularly from wind, forced the system operator to reduce output from wind, CCGT and biomass power stations. This is likely to be an increasingly common occurrence as renewable capacity in the UK is set to rise further – see our graph of the month section for more details.

The first half of April is forecast to be windless, with temperatures slightly lower than we have seen of late, which could increase demand for gas, supporting prices but healthy supply levels should limit gains. European gas storage capacity was around 41.5% in the middle of March, compared to 22.5% at the same time last year.

  • Electric Vehicle Charging developer GRIDSERVE has unveiled a £1 billion ‘Electric Forecourt’ EV infrastructure programme. The UK-wide scheme aims to deliver ultra-fast EV charging for the public and will involve the development of over 100 forecourts in the next 5 years. The first sites in York and Hull are due to start late 2019 and will also incorporate subsidy-free solar and battery storage.
  • Plans were announced in March by the UK government to ban gas and other fossil fuel boilers in any new homes built from 2025 in a plan to accelerate ‘low carbon homes.’ This could nearly quadruple electricity demand for home heating by 2050.
  • UK carbon emissions drop for a sixth consecutive year according to BEIS figures. Emissions fell by 1.5% in 2017 and continued on the same trend in 2018. The rate is, however, slowing compared to a 5.9% fall in 2016 and 88.7% back in 2014. This highlights the fact that continuous cuts cannot be taken for granted and that emissions from oil and gas will also have to be cut if the UK is to meet its legally binding carbon targets in the future.
  • The Scottish Energy Minister has highlighted the need for significant investment in Scotland’s gas and electricity infrastructure. The country’s energy policy aims to generate 50% of the power required for heating, transport and electricity from renewable sources by 2030, but investment in transmission infrastructure is vital to ensuring investor confidence in renewable projects.

 

The UK grid system has been under increasing pressure over the last decade with the rise of renewable generation feeding into the electricity network.

A challenge for National Grid is balancing the system to ensure supply meets demand, particularly during peak periods over the winter, however there is a new challenge of ensuring that the system is balanced when renewable generation is high and UK demand is low. When this occurs, imbalance prices turn negative, as was evident on the 24th March when imbalance prices turned negative for 13 consecutive settlement periods in the day. On the 24th, wind output feeding the grid was significantly higher than forecasted UK electricity demand, which, as can be seen from the graph, resulted in a negative imbalance volume and forced the system operator to reduce generation output from wind, CCGT and biomass power stations. 

 Net imbalance volume

This comes at a cost to National Grid who are required to compensate the generators for their loss in revenue via ‘constraint payments.’ In 2017, the payments to wind farms totalled £100 million, and official figures suggested that the wind farms affected received on average 40% more revenue when they were switched off then when they were producing electricity.

Negative imbalance is not a new occurrence, especially when wind output is high. However, forecasts show that such instances could become considerably more common as renewable capacity rises further. Cornwall Insight has predicted that as much as 14% of half-hourly settlement periods could produce negative prices by 2034.

The event last month also highlights the significant impact that high levels of intermittent renewables output have on wholesale power price, which, in turn, can significantly reduce revenues for renewable generators. This may impact on investor confidence in renewable projects due to uncertain revenue streams; therefore, diversifying a site with other technologies such as battery storage could be the solution.

Looking forward, National Grid’s newly created Electricity System Operator (ESO) arm believes that the UK can generate enough to meet demand this summer, with peak demand expected to hit 33.7GW and minimum generation capacity forecast at 39.8GW. However, ESO has also stated that the amount of solar power connected to the grid is now making it harder to balance supply and demand over the summer months. They predict that, in the short term, it is unlikely that they will need to instruct inflexible generation such as solar PV to reduce output in weeks when demand is low but, with renewable capacity increasing, it could be required in the future.

Electric Vehicle Charging Points – The number of electric vehicles entering the UK market is forecast to soar over the next decade and we need to ensure the infrastructure is in place to cope with the demand. Carter Jonas is working with developers and investors, targeting sites along the major road networks and in areas with large footfall and dwell time.  Contact us now if you think your site may be suitable, as securing grid capacity early on is key.

Solar PV – We are seeing an increase in approaches for large-scale, subsidy-free solar schemes following a decline in the cost of PV panels. With the market picking up, landowners and businesses should act now to secure rental agreements and grid connections. Smaller schemes may also still be viable, even with the FiT scheme closed, providing there is high on-site electricity usage, as the generation can be used to offset forecasted electricity price rises.

Battery Storage – The market for behind-the-meter battery storage and Demand Side Response (DSR) is evolving quickly. The income streams are becoming more uncertain, but the possibility of tying in batteries with Solar PV is making the financial model more favourable, particularly for energy-intensive industries with an annual electricity spend of higher than £100,000.

Gas and Electricity Brokerage – Volatility in wholesale markets, combined with rising non-commodity charges, could force energy prices up by 50% by 2020 compared to 2016 prices, according to recent figures. Carter Jonas can help manage these risks by working with businesses to produce an energy strategy and ensure they are not only getting the most competitive price through our brokerage service, but also taking advantage of other potential income streams.

Agency & Investment Opportunities Whether you are seeking energy investment opportunities, have assets to sell, or would like advice on the marketability and potential valuation of sites or operational assets, our Energy Agency team would be delighted to assist. 

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@ Helen Melling
Helen Melling
Senior Energy Specialist
0113 426 9868 email me about Helen
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Helen is an Energy Specialist based in our Leeds office.

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