Cornwall Insight comments on negative wholesale prices recorded for the first time

Cornwall Insight comments on negative wholesale prices recorded for the first time

On 9 December the UK experienced a negative day-ahead trading price for the first time, with 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 (GB) throughout the weekend combined with low demand levels, saw outturn day-ahead hourly prices turn to this record level. Cornwall Insight looks at what this means for the energy industry.

On 9 December the UK experienced a negative day-ahead trading price for the first time, with 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 (GB) throughout the weekend combined with low demand levels, saw outturn day-ahead hourly 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 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.”