Thinking Energy: Adverse weather and price spikes across Europe

Pricing Signals

At the end of the day power prices are set by the straightforward economic concept of supply and demand. Depending on your energy market these prices will change every 5, 15 or 30 minutes. The main drivers of power prices are known as fundamentals, these can be generation mix, gas or coal prices, carbon pricing, demand and many more.

In recent years we have seen underlying (or baseload) power prices rapidly increase across Europe particularly with the scarcity of gas after Russia invaded Ukraine, and European countries stopped purchasing Russian gas overnight. In other geographies we have seen underlying power prices oscillate dramatically, such as in New Zealand depending on hydro lake storage. 

However, it’s not just the baseload prices that shift. With a growing portion of the world’s energy supplied by renewable generation (yay!) we are starting to see more negative and more high wholesale prices at certain periods in the day - representing an oversupply or scarcity situation. The chart below shows cumulative negative power prices for a number of countries across Europe and South Australia in the Australian NEM. And whilst 2024 is not over yet it has certainly broken records in many countries - including Spain which had their first negative prices this year. Negative prices send a key signal to flexible assets and flexible demand to effectively charge or increase demand to balance the grid. 

Meanwhile in Germany, last week we saw almost zero wind generation, these still conditions resulted in very elevated power prices across the evening peaks in particular. It’s impressive to see the correlation between wholesale prices and wind generation. Germany has massive renewable energy targets and this level of volatility is sending strong signals to battery developers who are eyeing that market very closely.

One of the more opaque price signals to flexible assets can be network tariffs. In the GB market ‘triad chasing’ used to be one of the core revenue streams for behind-the-meter flexible assets, so much so that assets would often chase triad revenue 15-20 times each winter to ensure that they were exporting during one of the three triad periods. In recent years the price signals for triads have been dampened significantly. For more detail on this, take a look at Ashok’s video below.

 Industry Insights: New interconnectors announced in GB

The GB energy market currently has nine operational interconnectors connecting the GB energy market to neighbouring countries in Europe including France, Ireland, Northern Ireland, Netherlands, Norway, Denmark and Belgium. As GB is an islanded market these interconnectors play a critical role to keep supply and demand in balance. They are scheduled as a result of market pricing mechanisms meaning that low priced renewables or nuclear generation is usually exported. 

Last week Ofgem announced the approval of five new interconnectors, totalling 6GW of capacity. This should mean that more of GB’s increasing portfolio of offshore wind in the North Sea will be able to be exported to Europe. These interconnectors will be with Germany, Ireland, Northern Ireland, Belgium and the Netherlands.

Product Corner: TOU Charging for On Demand EVs

On the topic of price signals, we frequently see retailer and network tariffs with a time of use component, where pricing is more expensive during peak periods (ie. weekday evenings). We’re quickly seeing the On Demand Charging space mature and we are excited that a number of our clients requested this and the new charger availability functionality we mentioned in last week’s newsletter, these are both live for our clients to utilise.

To learn more, take a look at the preview below and if you are a Gridcog customer be sure to check out more detail in the Gridcog Library and in our Customer Docs. 

Solar and Storage Live Barcelona

We were honoured to be invited to speak at this year's Solar & Storage Live Barcelona.

Last Wednesday, I took to the Keynote stage to share insights on the key features of the energy transition, including negative price trends, wholesale spreads, solar yields and how these impact the business case for energy projects with flexible assets across Europe. 

Thank you to everyone who attended, it was amazing to see such a packed out audience. If you would like a copy of the slides we presented then please sing out. 

That’s all for this week. If you’d like to see how Gridcog can model your energy projects, click here to book a call with our team.

Or, if you have any interesting project use-cases you’d like to see modelled in Gridcog, email our marketing magician dan.pearson@gridcog.com and we’ll spin it up!