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Electricity prices at multi-year highs as low levels of wind generation see the UK turn to imports

Richard Simmonds • March 10, 2021

 Electricity prices are at multi-year highs with the maximum day ahead price hitting a level that is three times higher than those typically seen in the first week of March. 

Prices are three times higher than average

According to EnAppsSys, a combination of low wind generation and post-Brexit market arrangements are the main culprits for the surge in electricity prices. 

In the first week of March, the day ahead price hit a huge £683/MWh, a figure that is three times higher than the £191.55/MWh typically seen for this time of year. In fact, in the first three months of 2021 energy prices, in general, have been higher than in the same period over the preceding six years.

Typically, the first week of March sees a high period of demand as the period (November-February) where companies are encouraged to reduce their electricity consumption ends. 

Several causes

The cause for the jump in electricity prices was down to several factors including the extremely cold weather that caused wind generation to tumble forcing the UK to become more reliant on imports. 


Also read: Wind Energy breaks new record and the link between Fishing and Energy in the Brexit Trade deal

Brexit impact

With the UK leaving the EU internal energy market thanks to Brexit power prices have risen sharply in 2021.


In January, prices hit a record high of £1,500/MWh in the day ahead market and the imbalance price reached £4,000/MWh.


“On March 2 and 3, the interconnector capacity auctions for the evening peak resulted in high prices. In these auctions, the interconnectors were the marginal source of power, which meant that they could set the market price. The high capacity auction prices mean that to make a profit, the purchasers of the capacity need to clear at a price higher than the cost of the capacity and the price they can buy power at in France, Belgium or the Netherlands.


“Now that the GB market has left the EU internal energy market, it has left the day-ahead market coupling arrangements. The IEM day-ahead market coupling process with its implicit allocation of capacity on the interconnectors has meant that power flowed from the continent to the GB market at a much lower price.


"However, with the interconnectors now falling back to explicit auctions, this has resulted in extreme prices for capacity when the GB market is under stress,” said Phil Hewitt, director of EnAppSys.


Also read: Brexit -Deal or no deal, what will the implications be for the UK Energy Sector?



Dyball Associates will keep you informed of the latest changes and our team of energy market consultants can guide you through the steps to enter the UK energy market.

 

Whether you’re looking for electricity and gas systems or support on starting an energy supply company, Dyball Associates can help.

Further Reading

Electric Car ownership grew more than 50% in 2020, a growing opportunity for Energy Suppliers


Energy Suppliers still installing tens of thousands of SMETS 1 smart meters


Pioneers of Power – The origins of the Gas industry


Dyball Associates are proud to help new supply businesses successfully launch in the UK market.

 

Through our energy market consultancy services, and the software we've developed, we're supporting new UK electricity and gas suppliers get set up and start supplying.


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