Electricity prices soared to a record in Britain as a period of still weather is curbing wind power, exposing the U.K.’s reliance on intermittent renewables.
U.K. power for next day exceed 400 pounds ($553) a megawatt-hour at an auction on Monday, an all-time high. Wind generation is currently below normal, accounting for about 11% of all the electricity entering the grid. That’s leaving the market exposed to swings at a time five nuclear units are offline.
The U.K.’s ability to meet peak demand was already set to shrink this winter as coal and nuclear power stations close early. The outlook has worsened as low wind speeds have forced Britain to rely more on fossil fuels to produce power at a time Europe is facing a shortage of gas and coal prices are surging.
“It does feel that prices are overshooting,” Phil Hewitt, executive director of industry consultant Enappsys Ltd. “Looking ahead, Wednesday and Thursday look even more volatile compared to tomorrow, so we suspect that this is not the end of the high prices for this week.”
Day-ahead power rose to a record 400.01 pounds (468.83 euros) a megawatt-hour on the Epex Spot exchange, and 354.10 pounds on the N2EX market operated by Nord Pool. That’s more than five times the average day-ahead price during the past year on Epex.
The highest-priced hourly contract was a record 1,750 pounds from 7 p.m. to 8 p.m. London time on Tuesday on N2EX.
“It’s just like we are not receiving enough renewable production in the U.K.,” said Ogan Kose, a managing director at Accenture. “The expected case would be that renewable production would contribute up to 18-20% of overall electricity generation, this is not happening at least nowadays.”
Prices are so volatile that Epex doubled the price cap for U.K. intraday power to 6,000 pounds a megawatt-hour, according to a notice on Twitter.
The calm weather highlights the shortcomings of Britain’s growing reliance on green energy at a time fossil fuels are also expensive. Wind generation is set to be low this week before finally increasing on Friday, which means “brutal” conditions for prices, according to Enappsys.
U.K. gas futures rose above 150 pence a therm for the first time ever. Low storage levels in Europe and high prices across the U.S. and Asia are driving prices to record levels, with shortages this winter looking increasingly likely.
“Power prices are being driven by high gas prices but when prices start to get really, really high, it’s being driven by scarcity, rather than just the underlying cost of production,” said Marlon Dey, research lead for Great Britain at Aurora Energy Research. “When we have scarcity events and wholesale prices spike, the cost is going to go up for consumers.”
The U.K. is also struggling to count on its nuclear fleet, once a reliable source of low carbon power around the clock. Electricite de France SA has five nuclear units offline, removing about 3,000 megawatts from available generation.
By 2024 five of the U.K.’s eight nuclear plants will be halted permanently. While EDF is building a new atomic station, Hinkley Point C, that won’t be generating until 2026. The government is in talks with EDF about financing for a further station at Sizewell C.
Soaring power prices are also being driven higher by surging costs on cross-border cables, or interconnectors, as competition to secure flows of electricity increases, Enappsys said.