NESO has released its winter outlook for winter 2024/25. The outlook provides NESO’s expectation of how much generating capacity and demand are expected on the grid between November 2024 and March 2025. Back in June, NESO released the Early Winter Outlook for 2024/25 and a review of winter 2023/24.
Winter 2023/24 saw record-low battery revenues following low price volatility in the wholesale markets. With supply margin expected to be similar in 2024/25, what does this mean for batteries?
This article will review the latest updates to the outlook, what prices are forecast to look like this winter, and how this can impact battery revenues.
This is slightly lower than the margin of 5.6 GW expected in the early outlook in June. However, the latest margin is an increase from the outlook for winter 2023/24 of 4.4 GW. On average, last winter saw 11.6 GW of daily surplus generation and a minimum of 1.6 GW.
Daily surplus generation for winter 2024/25 is forecasted to be 9% higher than last year’s forecast
Daily surplus in winter 2024/25 is forecast to be 9% higher than what was forecasted for winter 2023/24. NESO expects 29% more surplus during the first two weeks of November before the gap reduces as we head further into winter.
NESO uses a 90% confidence bound to account for variation between days. The lower bound for 2024/25 is 23% higher this winter than the forecast for last winter.
Last winter, surplus fell below the 90% confidence bound on 14 separate days. This was due to lower-than-expected wind generation, nuclear outages, interconnector outages, and increased demand during cold weather.
Minimal planned maintenance from interconnectors is expected over the winter months. However, there are some planned outages in October and November. The 2 GW IFA interconnector between Great Britain and France will operate at half its capacity for a few weeks in October and November.
The 1.4 GW North Sea Link, connecting Great Britain to Norway, is also expected to provide no capacity in the second half of October. NESO’s modeling has accounted for planned maintenance and unplanned outages in the form of breakdown rates.
However, any unplanned downtime beyond this could lead to price volatility.
The winter outlook shows a greater reliance on interconnectors over winter
With the commissioning of the 1.4 GW Viking Link in December 2023, Great Britain is more interconnected than ever. Another 500 MW of interconnector capacity will also be added to the system by the end of the year. This comes from the 500 MW Greenlink, connecting Great Britain to Ireland. Following the addition of Greenlink, total interconnector capacity between Great Britain and the rest of Europe will reach 11.3 GW.
Power prices are expected to be higher in Great Britain than in Europe, meaning it will be a net importer. Since June, the Q4 2024 and Q1 2025 prices for peak load power contracts have been higher for Great Britain than for France and the Netherlands.
Great Britain could rely on more expensive generation if interconnectors are unavailable during peak demand.
Gas and carbon prices are expected to be higher across Great Britain than in Europe. These drive power prices, which in turn affect spreads. So, what could prices and spreads look like this winter?
Gas and carbon prices to be higher in winter 2024/25
Gas and carbon prices have generally been trending downward since 2022. This means that although gas, carbon, and power prices are expected to be higher in Great Britain than in Europe, they are still likely to be relatively low compared to previous winters. However, these prices would exceed the lows in winter 2023/24.