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U.K. Power Jumps to 2-Year High as Cold Triggers Oil-Fueled Generators

U.K. power rose for a second day to its highest price since January 2009 as E.ON AG and RWE AG started oil-fed units after the grid operator predicted today’s demand for electricity may be the strongest this year.

With weather forecasters calling for snow and freezing temperatures, baseload power for tomorrow climbed 7 pounds, or 9 percent, to 82 pounds ($130) a megawatt-hour, as of 4:30 p.m. in London, according to broker data compiled by Bloomberg. That’s its highest level since Jan. 6, 2009. The equivalent contract in a daily auction on Nasdaq OMX Group Inc. and NordPool Spot AS’s U.K. power market N2EX rose 5.2 percent to 74.80 pounds.

Electricity demand may reach the highest level this year, exceeding yesterday’s annual record, National Grid Plc data show. Power consumption may be about the same as yesterday at 59,699 megawatts at 5 p.m. in London. National Grid underestimated maximum power consumption yesterday. The forecasts are updated during the day.

E.ON started a unit at its oil-fed power station at Grain, while RWE switched on units at its oil plants at Fawley and Littlebrook, grid data show. All are in south England. Stations fed with heavy fuel oil can produce power quickly when needed and are more costly to operate than gas or coal-fired plants.

Severe weather warnings were issued across Scotland and Britain, and temperatures remained below zero degrees Celsius (32 Fahrenheit) in most areas today, according to London-based forecaster the Met Office. Colder weather boosts energy demand.

Switched Off

The start of oil-powered stations signals there may be inadequate supply of less-expensive electricity to meet demand. Should a power station unexpectedly halt, a generator may have to pay a high price to recoup lost electricity.

About 11,600 megawatts of capacity fired by coal, natural gas and nuclear reactors were idle this morning, according to grid data compiled by Bloomberg. Some utilities may have switched off natural gas power stations and replaced them with coal-fed generation, while others may be under maintenance.

So much capacity offline at this time of year “isn’t that surprising,” Jason Durden, an analyst at London-based EnergyQuote, said by e-mail. Current demand levels are what would be expected during a first quarter of the year, he said.

U.K. power for January was unchanged at 53 pounds a megawatt-hour, according to Bloomberg data. That’s its highest level in almost two years. Baseload is delivered around the clock. Bloomberg compiles data with prices from brokers including ICAP Plc, GFI Group Inc. and Spectron Group Ltd.

To contact the reporter on this story: Catherine Airlie at cairlie@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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