Market News

(Bloomberg) -- The UK’s grid operator issued a power-market warning for this afternoon, saying there’s an insufficient buffer between predicted supply and demand as declining wind output coincides with plunging temperatures.

The warning is one of several issued this winter and highlights the risk of building out wind turbines without sufficient back up for days when it’s dark, cold and windless. Periods of relatively low wind can drive prices higher especially when demand for heating is increasing. The government is planning to build more renewables in its bid to decarbonize electricity production by 2030.

The three-hour notice period is set to begin at 4 p.m. London time, according to the National Energy System Operator. The shortfall is 1.7 gigawatts, it said in a notice published on Tuesday and reissued this morning.

Wind generation is projected to dip by more than previously expected, falling to about 3 gigawatts in the midst of a cold snap. Average temperatures are forecast to be just above freezing Wednesday, well below the 30-year normal for this time of year.

UK day-ahead power prices are between £241 and £300 per megawatt-hour for this afternoon, according to Epex spot data. That compares with £99 per megawatt-hour for 4 p.m. on Tuesday.

Scheduled interconnector flows from France to the UK have increased, according to Elexon. Electricity imports via huge cables that run under the sea to markets in Europe like France and Norway are a key part of Britain’s energy mix, despite the government hoping to make the UK a net exporter by 2030.

“This is a routine tool that we use most winters, and means we are asking market participants to make any additional generation capacity they may have available,” a NESO spokesperson said in a statement. It doesn’t “mean electricity supply is at risk.”

The UK’s Met Office has warnings in place for snow and ice across the country on Wednesday and expects to issue more for later in the week too.

Temperatures could fall to the lowest this winter, reaching -15C in locations with lying snow in Scotland or northern England on Thursday night, according to Chris Almond, deputy chief forecaster at the Met Office.

--With assistance from Eamon Akil Farhat.

(Updates with power prices in fifth paragraph)