On 9 December the UK experienced a negative day-ahead trading price for the first time, with energy prices for 03:00 AM to 04:00 AM UTC delivery on the hourly day-ahead auction dropping to -£2.84/MWh.
Exceptionally high wind generation in Great Britain throughout the weekend combined with low demand levels saw outturn day-ahead hourly energy prices turn to this record level. Cornwall Insight looks at what this means for the energy industry.
James Brabben, Wholesale Manager at Cornwall Insight, said: “While there have been some negative energy price occurrences on the within-day wholesale market, this is the first time day-ahead auction prices have ever fallen below zero. Wind output levels were high over the weekend of 7-8 December peaking at 16.2GW on 8 December. This continued over the early hours of the Monday morning coupled with low demand that is usually seen at this time. It was a perfect storm for prices to drop.
“This incident also highlights the increasingly interconnected nature of coupled European markets. With negative pricing being observed throughout German, Dutch and Belgian day-ahead power prices, with German prices reaching a low of -€16.09/MWh between 2:00 AM to 3:00 AM UTC.
“At the time of negative day-ahead delivery prices, GB was receiving 1.1GW of power through NEMO and BritNed, at the same time exporting 1.4GW through the IFA to France. GB was effectively acting as a transit country for the flow of continental European power.
“While this may be heralded as a watershed moment by flexibility providers, taking the opportunity to be paid to consume electricity. These low prices will be a cause for concern for generators, whose revenues could be significantly affected if this price cannibalisation effect continues.
“With increasing wind penetration across Europe, negative prices now occur even in the depths of winter and this a trend to watch out for as more intermittent renewables capacity comes online.”