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Cold Weather Pushes UK Electricity Market Prices to New High

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Chilly temperatures and a slump in wind power generation have led to an electricity crunch, forcing the National Grid to put out a call for extra capacity and sending electricity prices surging tenfold in a day.

Yesterday, the National Grid Electricity System Operator put out its fifth official or informal warning about electricity supplies since October. The latest is in effect for this evening, 6 January between 4 pm and 7 pm.

But the ESO said although an electricity margin notice can “sound quite serious,” it is a “routine signal we send to the market to indicate that we’d like a larger cushion of spare capacity, and does not mean electricity supply is at risk.” The latest warning calls for generators to bring an extra 524 megawatts (MW) of electricity online within 24 hours.

National Grid attributed the latest warning to “colder temps, renewable output levels & generator availability.”

Electricity supplies are expected to be the tightest in four years this winter. National Grid previously assured the public that blackouts are unlikely, particularly as electricity consumption is expected to be lower than usual due to the coronavirus restrictions.

However, Hartree Solutions, a market commodities trading business, said the latest call suggests the country is “at much greater risk of blackouts this winter than the National Grid has forecast.”

Prices on the wholesale electricity market surged Tuesday, reaching £1,000 per MW on one of the country’s most important electricity auction platforms for 4 pm on Wednesday, when demand is supposed to peak. That’s the highest price registered since the auction began in 2014 and ten times the price for the same hour on Tuesday.

Consumers will eventually see the impact of rising wholesale electricity prices on their energy bills in the coming months, when suppliers adjust rates and Ofcom recalculates the level of the energy price cap.

National Grid said the warning merely signalled that “in the short term we would lie a greatest safety cushion (margin) between power and demand and available supply. It does not signal that blackouts are imminent or that there is not enough generation to meet current demand.”

Lauren Smith
Lauren Smith

Lauren Smith has worked as a journalist and copywriter for most of the last decade, covering technology, energy, and consumer rights, in the US and UK.

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