2018 has been a year to remember across the electricity market on the island of Ireland. As people wind down for the festive season break, there are many achievements to reflect upon (a whole new market!), as well as quite a few uncertainties to ponder for the new year. And of course the market doesn’t stop for Christmas, so for operational and trading staff we are actually entering the busiest and most volatile months, as electricity demand peaks and the wild weather….. well it continues!
So it’s an appropriate time to take a look at the opening months trends from ISEM, and some of the questions that lay ahead as we enter 2019.
Day Ahead Markets
With the most of the value trading in the markets, the Day Ahead prices in ISEM have been relatively stable and in line with market fundamentals. With unusually high levels of plant outages (Great Island and Moneypoint being unavailable), peaking plant has cleared in the main auction on just a few occasions so far at a maximum price of €282 MWh. Wind and demand have driven the price movements, with the most interesting feature being the high occurrence of €0 MWh price periods overnight, in high-wind/low-demand conditions.
As Great Island and two of the three Moneypoint units are scheduled to return in the closing weeks of December, the extent to which Day Ahead prices soften will be interesting to monitor. And as the wind generation levels increase over winter and with increased capacity being built, will we see negative prices in the Day Ahead auction?
The volatility of the opening weeks BM prices has tempered only slightly, and continues to be the biggest talking point across the market – particularly the wind industry. On the high side, the three capacity market events (prices > €500 MWh) in relatively benign market conditions have triggered a response from participants, with changes proposed to market rules to reduce the exposure of available and in-merit generators. On the low-side, the frequency and scale of negative pricing is probably the most surprising outcome of the new market design. Typically (but not always) occurring in periods of wind generation delivery above forecast, as waste-to-energy plant is paid to reduce output, the "balancing cost" of forecast error is proving a different dynamic than anticipated ahead of ISEM.
While generation under REFIT is protected to some extent by the "80%/20%" calculation of their reference price, the continuation of the negative BM pricing is starting to feed its way in more longer term market discussions for renewable developers. Will we see more negative wind prices over winter as wind increases? Or will the return of more baseload plant change the dynamic in the BM and dampen the frequency of both high and low prices?
The second round of the ISEM Capacity Mechanism Auction is taking place at the moment, with results due out later in the week. This time last year the conversation centered around one question – what is the price? (The answer being €41.80 MWh.) Again the price is the key outcome for most generators, dictating whether they were successful in gaining a contract for the next year. Additionally this year though, attention will then turn to generators that don’t secure contracts, if any. The bilateral contracts agreed with generators since last years auction demonstrate that other alternatives are possible. Will we see similar events unfold subsequent to this weeks auction?
Record Wind… Again!
An update to an article from last month – there was a new record for wind generation across the market on the evening of Wednesday the 12th. Output was 3,990 MW just after 8pm, nearly 200 MW higher than the previous record!
We may not have a new market to look forward to in 2019, but I’m sure there will be plenty more to talk about as ISEM evolves.
From the Energy Markets team in SSE Airtricity, have a great Christmas and happy New Year!