EDF Cashes In on U.K. Heatwave That Made Power Prices Jumpby
Aurora Energy estimates EDF plants made $152m early September
RWE’s Npower was second-best earner from price spikes
Electricite de France SA showed it doesn’t need subsidies to make money in the U.K. power market as its stations earned more than peers in a late summer heatwave that pushed prices to records.
Just as Britain approved a new reactor that will earn EDF twice the market rate for power, revenue at the Paris-based utility’s existing U.K. plants soared 66 percent on Sept. 14 from a year earlier, taking its total for the first two weeks of September to an estimated 115 million pounds ($150 million), according to Aurora Energy Research Ltd., which advises utilities, banks and governments. RWE AG’s Npower unit was second with 69.2 million pounds for the period.
Electricity prices hit a record last week as the U.K.’s hottest September day in more than a century boosted demand for air conditioning and wind generation slumped. At the same time, gas-fired availability is set to drop to the lowest since 2009 this month as plants halt for maintenance, according to S&P Global Platts. EDF, which will get billions in subsidies to run the new Hinkley Point nuclear plant, benefited as Britain’s sole atomic power producer.
“EDF does stand to gain substantially, not only because it has the most generation on the system, but because running costs for its nuclear fleet are so low” and the high prices on Wednesday and Thursday “treated them very well,” Daniel Russo, an analyst at Oxford-based Aurora, said. “A lot of generators were hoping to see exactly this type of scarcity pricing,” he said, referring to the jump in rates for limited supplies.
Officials at EDF and Npower declined to comment.
EDF Energy Plc earned 17.5 million pounds on Sept. 14, taking total revenue by generators in the U.K. to 68 million pounds, more than double the daily average in September last year, the Aurora data show. The income estimates are calculated using the power price and the amount of electricity each station sends to the grid. It doesn’t include revenue from the balancing market.
EDF has 14.2 gigawatts of power capacity in Britain and is one of the nation’s six biggest energy suppliers, according to its website. A gigawatt is enough to power 2 million European homes.
The additional revenue should be “helpful” for the profitability of EDF’s U.K. unit, analysts at RBC Capital Markets said in a note.
U.K. day-ahead power prices jumped to 160 pounds a megawatt-hour on Sept. 14 as temperatures in southern England soared. Prices for delivery in October hit all-time peaks and week-ahead rates traded at the highest levels since 2008.
In an auction yesterday, electricity for delivery Monday climbed to a record 169.65 pounds a megawatt-hour with hourly prices jumping as high as 960 pounds, according to APX exchange data. Average wind generation is forecast to decline to 863 megawatts compared to a 7-day average of 2,264 megawatts, according to a Bloomberg model. Intraday prices for Tuesday rose as high as 400 pounds, the data show.
While it’s unusual to have such high prices in September before the winter heating season starts, there are likely to be more jumps once demand starts to pick up, according to Enappsys Ltd., an energy trading consultant in Yarm, England.
Increased demand may stretch supply margins already strained after U.K. utilities closed coal plants equivalent to 9 percent of total generation capacity in the past year. That’s leaving the nation with the tightest supply buffer on record this winter, according to Timera Energy.
With operators doing maintenance on their gas-fired stations, any unexpected supply restrictions such as the unplanned halt at EDF’s Hunterston nuclear station on Sept. 14 or reductions in wind or solar generation can tighten supply margins to “precarious levels,” Phil Hewitt, a director of Enappsys, said.