U.K. Power Prices Soar as South Basks in Late Summer Heat

  • Use of air conditioning boosting electricity consumption
  • Plant outages before winter reducing available supply

U.K. power prices surged to record levels as unseasonably warm temperatures in the south boosted demand for air conditioning and wind output is forecast to slump.

The day-ahead and October contracts both rose to records Wednesday as peak consumption is expected to increase to 39 gigawatts Thursday, 26 percent higher than last year, according to Inenco Ltd. Wind generation is forecast to drop 73 percent from a day earlier at 11 a.m. London time Thursday, Bloomberg data show. Supply is further reduced after one of Electricite de France SA’s nuclear units unexpectedly halted.

The increased demand from air conditioning “combined with the current muted wind generation and unplanned losses in nuclear generation have seen minimum supply margins significantly tighten,” Dorian Lucas, an energy trader at Inenco in Lytham St Annes, England, said by e-mail. For Thursday he predicts a negative margin, with demand outstripping supply by 1 gigawatt.

The U.K. is expected to have the tightest supply buffer on record this winter, according to Timera Energy. Network operator National Grid Plc has contracted 10 power stations to use as emergency backup from November. Finding enough supply will be a challenge for National Grid for the next two months as the availability of gas-fired generation is set to drop to the lowest since April 2009 in September, according to S&P Global Platts.

“We always knew this Tuesday and Thursday evenings were likely to be tight as we have a large amount of thermal plant and interconnectors out with planned outages ahead of the winter season,” said Ashley Thomas, an analyst at Societe Generale SA in London.

Day-ahead power climbed to a record 160 pounds ($210.30) a megawatt-hour, according to broker data compiled by Bloomberg. Prices rose as high as 999 pounds a megawatt-hour for the hour to 8 p.m. Thursday in an auction on N2EX while the October price jumped 6.6 percent to an all-time high of 45.41 pounds a megawatt-hour, data show. System prices, or the cost of balancing the market, soared to 446 pounds yesterday.

The high system prices are a result of more expensive forms of power generation being required to balance the system during peak demand, Lucas said.

Click here to read about recent volatility in the U.K. power market

The U.K. will be one of the warmest regions in Europe relative to average levels, with temperatures predicted to be 7 degrees Celsius (12.6 degrees Fahrenheit) above usual in the southeast on Wednesday and Thursday, according to MDA Information LLC.

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