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

Prices are three times higher than average

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?

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