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UK Coal Benefits from Exceptionally High Wholesale Electricity Prices

September 19, 2016

By Paul Homewood

 

 

The Renewable Energy Foundation have issued a note about the spiking of wholesale electricity prices last week:

 

 

UK Coal Benefits from Exceptionally High Wholesale Electricity Prices

The unusually hot September weather, and a resulting higher demand from air-conditioning and refrigeration units, over the past week has contributed to very high wholesale electricity prices, with coal stations being the main beneficiary.

Coal appears to have been called upon because several gigawatts of gas generation were offline. Furthermore, generation from the UK’s 14 GW of wind turbines during the period was, as is likely during a hot spell, modest, ranging from a high of 4GW to less than 1 GW, or from 29% to less than 7% of its capacity.

The prices charged by the coal generators during this period were exceptionally high. West Burton coal-fired power station, owned by EdF, charged up to £1,237 per MWh for providing an extra 1.5 GWh of electricity on Wednesday 14th September. This is approximately 30 times the usual wholesale price. Ratcliffe-on-Soar coal-fired power station, owned by E.On, charged up to £1,484 per MWh for providing extra power, earning an extra £6 million for the day.

It is worth noting that the prices greatly exceed the £92.50 per MWh agreed with EdF for the output from the proposed new nuclear power station at Hinkley Point, and generally described as too expensive.

The prices charged by these coal stations may seem unreasonable, and there is every indication that these generators raised their prices to take advantage of their powerful position in the market during a time when there was unexpected demand. However, it is fair to recognise that the fossil fuel generators guaranteeing security of supply on an increasingly renewables-dominated grid face a high-risk market for their output, making future income hard to estimate. Offered the opportunity of generating in volume, and at an advantage, it is inevitable that these stations will maximise their income for the rainy days that almost certainly lie ahead for them.

In other words, the fossil fuel generators, in the present case coal, are operating in a distorted market created by government policy, and must offset their own increasing risk at the expense of consumers. Balancing the system is becoming more expensive because of the indirect effects of policy. It is difficult to see any practical way of preventing this; a further compensating distortion, a cap on fossil fuel prices for example, would only further damage price signals to invest in the firm capacity for which there is a pressing need. Government is now in a very difficult position.

http://www.ref.org.uk/ref-blog/333-uk-coal-benefits-from-exceptionally-high-wholesale-electricity-prices

 

As dispatchable capacity gets ever tighter, and intermittent renewables grow, this problem will only gets worse.

11 Comments leave one →
  1. Joe Public permalink
    September 19, 2016 10:21 am

    “As dispatchable capacity gets ever tighter, and intermittent renewables grow, this problem will only gets worse.”

    It’s almost as though the proponents of intermittents didn’t see that coming.

    Let’s not forget that during the periods intermittents are generating little electricity, they’re simultaneously generating fewer ROCs. Consequently, the price dependables pay for the ROCs they’re obliged to buy, rises too. Costs passed on to all consumers.

  2. Keitho permalink
    September 19, 2016 10:23 am

    The law of unintended consequences strikes again.

  3. September 19, 2016 10:24 am

    Well we saw this one coming – it’s called supply and demand. It’s a pity no one in Government has/had the intelligence to foresee the inevitable. I bet the big generators saw it coming and were fully prepared to cash in.

    • A C Osborn permalink
      September 19, 2016 7:31 pm

      Can’t blame them either as their Coal Plants are being starved of demand.

    • Graeme No.3 permalink
      September 20, 2016 6:17 am

      As put by that little known author Ernest Bramah (Kai Lung) an accurate definition of the greens.
      Blind, Deaf and devoid of the faculty of understanding.

      Adding in their Racist and Elitist characteristics we should be able to generate a suitable acronym, e.g. Blind, Racist, Elitist, Deaf and Incapable of Thinking – BREDITs?

  4. NeilC permalink
    September 19, 2016 10:27 am

    If this can happen on a very warm day in September, what is going to happen on many very cold days this coming winter?

    • Joe Public permalink
      September 19, 2016 4:13 pm

      Diesel gen-set owners will make their fortune

  5. Vanessa permalink
    September 19, 2016 11:17 am

    There is a mild consensus which says we are in for a cold winter this year. Usually when this happens there is very little wind so they could ice up so no wind power, the sun is usually weak so solar wont keep the lights on. We are left with very little to help keep us warm ! Coal and gas are the only energy we can rely on as nuclear is being shut down because of CO2 !!!! Gather in the wood folks and light lots of fires and wrap up!

    • Gerry, England permalink
      September 19, 2016 12:58 pm

      Bring on a brutal northern hemisphere winter to show them that there is no warming and how their energy policies are failing. If the windmills ice up then they consume energy by being heated to melt the ice. Blackouts, brownouts, industry reduced to working only 3 days a week – some of us are old enough to remember the days of Scargill & co. Of course we had no mass use of computers in those days, nobody knew what a barcode was – the price was on the sticky label. Push hard on the buttons and the till opened.

    • September 19, 2016 9:42 pm

      Not only is the sun weak in the UK winter, but it’s not visible at all for nearly two thirds of the day.

  6. It doesn't add up... permalink
    September 19, 2016 1:15 pm

    The title of the article is quite wrong: it should be “Consumers shafted by lack of available power from Renewables”

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