Storm Goretti Driving up Energy Demand

A frigid surge of snow, sleet and hail has caused temperatures in the UK to drop to as low as -12.5C this week, significantly raising the demand for electricity and straining interconnector relations with neighbouring countries.

With Storm Goretti expected to deliver substantial snowfall on Thursday, analysts caution that high demand and elevated prices may continue to impact Brits through mid-January, impacting Belgium, the Netherlands and Denmark as a knock-on effect.

Jake Thompson, a market analyst at Montel Analytics, a renewable energy researcher, stated:

“National electricity demand surged during peak hours as temperatures plunged earlier this week.

“Morning peak demand reached 44GW on Tuesday, with forecasts suggesting demand could rise to around 46GW during the evening peak. On Monday, Britain recorded its highest demand since March 2018 at 47.3GW.

“As a result, 23pc of demand was met by renewables on Monday, the day of the demand peak, leaving the system heavily reliant on the conventional gas-fired generation fleet during peak periods.

“To alleviate pressure on domestic generators, NESO, the GB system operator, intervened in interconnector markets.

“Ahead of the day-ahead auction, Nemo Link, BritNed and Viking Link were scheduled to export power from 5am through to the evening peak.

“However, NESO reduced these flows by purchasing volumes via competitive auctions, paying prices of up to £1,040 per MWh. The highest prices were recorded around 1pm and were more than ten times the weighted day-ahead price for the same hour.”

The choice to repurchase exports had significant repercussions in surrounding markets, especially in the Netherlands, according to Montel.

Harsh winter conditions lowered renewable energy production throughout the area, necessitating the use of fossil fuel generation to satisfy most of the demand.

Dutch producers were already sending electricity to Germany and Belgium, with additional supplies going to France, while depending on imports from Denmark and the UK.

On Monday, when Britain cut back on exports, Dutch imbalance prices skyrocketed to more than €4,000/MWh.

Jake added: “The cold snap could last until at least January 11, maintaining elevated demand levels.

“High prices are expected to persist due to the system’s reliance on gas-fired generation, especially during periods of low wind.

“Forecasts indicate wind output could fall to as little as 2GW on January 8, further limiting renewable supply and increasing upward pressure on wholesale prices.”

Source: TGS