Industry News Market Prices

Industry News Market Prices

Market Prices

Over the last few months prices in the wholesale energy market for electricity went negative. Instead of paying, people got paid, for taking supplies of power from the Day-Ahead Market (DAM). Now that’s not that unusual. There have been short periods before where charges have gone negative. But this was the first time that it happened to the average price across an entire day!

What lay behind this state of affairs was a combination of factors which typically drive down prices: a forecast of high wind generation and an expectation of low demand. Given that the pandemic is likely to keep the appetite for power under even the reduced levels seen in warmer weather, it wouldn’t be surprising when the wind blows to see further instances of negative prices.

There is a more important factor at work than wind and that is the price of natural gas. A glut across the world has forced down costs of a fuel which is a major determinant of wholesale electricity costs here. Apart from a modest spike in prices last winter, the average wholesale cost of electricity has been just over three pence a unit or £30 an MWh during the first quarter of this year in the Day-Ahead Market were close to 95% of electricity is traded. In comparison, the average price of a MWh was over £50 for the same period last year.

So what does mean for the FENI Renewable Generators? In short, nothing, all our PPAs are on fixed rates meaning our members are protected from these market fluctuations. FENI also have the advantage of ‘bulk buying power’ meaning when it comes to negotiations with the energy companies we are the price makers and not the price takers. But for Generators on variable PPAs if the wholesale electricity prices remain low and, as long as present conditions remain in force, it is very likely your export rates will continue to drop!