05 Jan 2023
Wendel Hortop

Festive Review: 5th January 2022

A roundup of all you need to know from the markets most relevant to battery energy storage. We’ll cast our eyes back over the previous three weeks in this post-festive period special. Our regular weekly update will resume next week.

Matt brings you the biggest news for battery energy storage from over the festive period

The headlines from the festive period are:

🎄 Power prices plummet due to lower demand, high wind generation, and falling gas prices

☃️ Frequency response prices all fall following reduced trading opportunity

❄️ Market benchmarks all fall, with FFR back top of the pile

🚨 Power prices hit record negative levels on 29th December

Wholesale trading

Key metrics:

  • Average day-ahead price: £152 /MWh, -60%
  • Average day-ahead spread: £155 /MWh, -61%
  • Maximum day-ahead price: £473 /MWh, -70%
  • Minimum day-ahead price: £-50 /MWh, -122%

Power prices dropped 60% over the festive period, with a combination of low demand, high wind generation, and falling gas prices all contributing. Demand fell 25% as commercial and industrial activity slowed down across the festive period.

We saw a new record low for prices in the GB day-ahead market, at £-50.08/MWh overnight on 29th December. Very high wind generation coincided with much lower overnight demand to cause these negative prices.

The following day, 30th December, saw a new record for half-hourly wind generation. Wind generation hit 20.91 GW at 6 pm on 30th December, and the day also saw clean energy provide a record 87% of total demand (this was subsequently beaten again on 4th January).

Hourly prices and daily price spreads from N2EX day-ahead price data.

Frequency response

Key metrics:

  • Average dynamic containment low price: £4 /MW/hr, -61%
  • Average dynamic containment bid volume: 965 MW, +18%
  • Average dynamic containment accepted volume: 687 MW, +37%

Lower wholesale trading opportunities led to falling prices in all other markets. The Dynamic Containment Low price fell 61%, in line with the fall in wholesale trading spreads. Dynamic Regulation High prices also fell significantly, as this remains a lucrative option for longer-duration batteries even at very low (or zero) prices.

Average dynamic frequency response prices for the week.

Volumes bidding into the Dynamic Containment markets increased to a record 1.22 GW across the festive period. This was due to new capacity entering the Dynamic Containment markets (you can read about this here), alongside lower opportunity in wholesale trading.

Meanwhile, the Dynamic Regulation High service continues to be oversubscribed, with an average of 135 MW bidding for only 100 MW of available contracts. This is because batteries that sell electricity in the wholesale markets can effectively charge for free by participating in Dynamic Regulation High.

Bid volumes for each dynamic frequency service. The total volumes accepted across the three markets are overlayed.

Battery market benchmark revenues

Key metrics:

  • Dynamic Containment benchmark: £57k /MW/yr (-59%)
  • 1-hour day-ahead trading benchmark: £52k /MW/yr (-81%)
  • 2-hour day-ahead trading benchmark: £97k /MW/yr (-65%)

The fall in wholesale trading opportunity and dynamic frequency response prices means monthly FFR is back as the most lucrative service available to battery storage. These contracts are bid month-ahead and so are locked in for the rest of January. Bidding closed for February contracts on 4th January, with results due to be published on 18th January.

The drop in Dynamic Containment prices means that outside of FFR, two-hour systems continue to see greater potential value than one-hour systems. This is because of the increased wholesale trading value they can capture by selling more energy with every discharge cycle.

Potential revenues for each main revenue stream, estimated from available prices. Trading value is calculated using Modo’s algorithmic dispatch model on EPEX day-ahead prices.

Next week

Key metrics:

  • Maximum National Grid ESO Demand Forecast: 40.6 GW Thursday 12th January
  • Minimum National Grid ESO Surplus Forecast: 10.3 GW Thursday 12th January

Demand is forecast to increase following the festive period, however remains significantly lower than the highs seen in mid-December. The highest demand of winter so far was 46.6 GW on 15th December.

With high wind generation forecast to continue, this means the grid is expected to be well supplied for the coming week with margins well above zero.

Generation surplus forecast for next week. Data from National Grid ESO 2 to 14-day Surplus Forecast.

Chart of the week

Monday, 29th December saw a new record low price in the GB day-ahead wholesale market. The price of £-50.08/MWh just beats the previous minimum set on New Year’s Day 2022.

Negative price periods in GB N2EX day-ahead prices, ranked by size. Color indicates the year in which they occurred.

The period between Christmas and New Year (or as no one calls it, ‘Crimbo-limbo’) saw 10 hours of negative pricing. Eight of these fell consecutively in the early hours of 29th December. This means that negative price periods during ‘Crimbo-limbo’ accounted for 8% of all negative price hours observed in the GB day-ahead power market ever.

The negative prices on 29th December saw 3.1 GW of offshore wind shut down across the 8 hours. This is due to payments under newer Contract for Difference agreements being set to zero when wholesale prices go negative for 6 hours or more.

The vast majority of negative price periods occurred during the spring and summer of 2020 when demand was substantially lower than normal due to Covid-enforced shut-downs. The fact that there are more negative pricing events is good news for battery energy storage, which can get paid to charge up during these periods.

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