Last week was expensive because solar alone couldn't save UK electricity bills
The week in numbers
Table: The Green Solutions. Created with Datawrapper
Figure 1: The bottom line represents the hourly UK wholesale price over the last 24 hours. The upper line shows what the price could have been if the renewables were not there. The gap between the two shows how much renewable generation is currently reducing electricity prices.
High prices to start the week
We started the week with three consecutive days of relatively high prices.
On Monday, the average price reached £118.68/MWh, which was actually the cheapest day of the week. The coefficient of variation (CV) was 0.435. There were no negative prices, while wind generation decreased and gas once again regained its role in the generation mix.
The following two days, Tuesday and Wednesday, saw prices remain high, with average prices of £126.10/MWh and £122.89/MWh, respectively.
On Wednesday, the peak price reached £265.89/MWh. I took it as a sign that prices were starting to go up. The positive impact of renewables that we had seen in previous weeks had largely disappeared.
This is what a low-wind week can look like on the UK grid. There were no negative prices at all, which meant gas generation remained an important part of the generation mix throughout the week.
On Thursday, the peak price reached £349/MWh
Thursday was the day when things really started to move.
The average price increased to £150.36/MWh, making it the highest daily average of the week. The most likely reason was the combination of low wind generation and high demand.
When demand is high and gas is setting the price, the more expensive gas plants can end up determining the marginal price. This can push the wholesale price very high.
Even the lowest price of the day, £70.40/MWh, was higher than many of the average prices we saw during previous weeks.
Observation: On Thursday, we also saw the highest gas peak price in a while (£349/MWh). For a client consuming a large amount of electricity during this period is a completely different situation from the negative-price period we saw just two weeks ago.
The price difference between a renewable-heavy weekend and a gas-dominated Thursday afternoon is now more than £300/MWh.
Friday to Sunday were still expensive
The price came down on Friday to £139.92/MWh, but then increased again on Saturday, reaching an average of £153.62/MWh.
This was the second-highest daily average of the week, with a very low CV of 0.180. This shows a gas-dominated grid running fairly consistently, with much less contribution from renewable generation.
This morning, with 45 settlement periods collected so far for Sunday, we have seen an average price of £154.60/MWh. This is currently the highest daily average of the week.
Prices have ranged from £102.00/MWh to £250.00/MWh. Again, this is an expensive, gas-dominated day with zero negative-price periods.
For the first time since I started writing about the UK grid, we have had no negative prices throughout the entire week.
The recent heatwave is likely part of the story here. With lower wind generation, there simply wasn’t enough renewable generation to push prices into negative numbers.
Figure 2: Daily average wholesale price over the last 30 days. The shaded band shows the range between the cheapest and most expensive half-hour of each day. Note the sudden upward movement this week compared with the negative-price weeks in late July and early August.
What is the storage situation?
Even though we have not seen any negative prices this week, the arbitrage opportunity remains good. The average price gap over the last 30 days is now £158.85/MWh. After taking into account of 85% efficiency, the net price gap is £115.56/MWh.
The highest price gap on any day in the dataset is now £278.60/MWh, while the lowest is £78.06/MWh. And importantly, every single day in the 30-day dataset has crossed both the £30/MWh and £50/MWh commercial viability thresholds.
Thursday is actually a good example here. The price difference between the lowest and highest prices was nearly £279/MWh, creating a significant charging and discharging opportunity for storage assets that can take advantage of half-hourly prices.
This is something worth keeping in mind: negative prices are not necessary better for battery arbitrage. A large enough spread between the low and high price during the day can still create a meaningful opportunity.
Figure 3: The difference between the highest and lowest electricity price over the last 30 days. Each bar represents one day’s potential storage opportunity. Notice how the bars remain high this week despite there being no negative prices. The gap on Thursday (13th August) is the highest.
Next week: 17 to 22 August
The average renewable share for the next two weeks is forecasted to be as low as 15.9%. That is significantly lower than the 30% we have seen recently.
Average prices are expected to be around £98/MWh, so it looks very much like we are heading into another fossil-fuel-dependent week.
But as we see it, we are now moving into the period where peak solar generation is no longer strong and wind generation has not yet reached the highest levels.
As the forecast currently shows, it might be a while until we start seeing consistent negative-price periods because prices are likely to remain relatively high until September.
So, what can we expect now? The main thing I will be watching is whether wind generation starts to recover next month.
