Power prices continue to climb due to high levels of plant outages, low levels of wind generation, and increased underlying commodity prices in recent weeks. Outages at power plants Huntstown (400 MW) and Whitegate (444 MW) have put pressure on the grid this year. Scheduled maintenance on Whitegate in Cork and Huntstown in Dublin were delayed as a result of Covid-19. Further unexpected outages at other power plants have increased the offline capacity to over 3,000 MW at times this year (for context, the average demand on the grid over the last month has been 4,184MW). This, combined with low levels of renewable generation, lead to three separate System Alerts (Amber) this month, with generation shortfall in Ireland stated as the reason.
Power Prices across Europe
The jump from 2020’s lows, partly as a result of the effects of Covid-19, to 2021’s high power prices this year is something that we are seeing across Europe and is not isolated to Ireland. The driving factors of this, such as plant unavailability, low renewable generation levels, and high commodity prices (especially gas), are being reflected across Europe. Wholesale power prices increased from an overage of €39.57/MWh in 2020 to €94.72/MWh YTD 2021 in the UK, an increase of 139% (153% in Ireland). If we look at other major power markets across Europe over the same time period, power prices have increased by 142% on average.
The two major offline gas-fired generation plants, Whitegate and Huntstown, are scheduled to be back up and running in November and October respectfully. This will provide some relief for generation margins as demand increases coming into winter. Coming into the winter months, we also expect to see wind generation levels increase, which should have a softening effect on power prices, especially on days when wind generation is high. As electricity prices are also dependant on other commodity prices the outlook for winter will also depend on how these underlying commodity prices outturn, bullishness in other commodities in the energy complex could also spell bullishness in power prices here.
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