Electricity demand close to outstripping supply during unprecedented heatwave

Research from Cornwall Insight has shown that electricity system margins in Great Britain (GB) were very tight during the record-high temperatures seen earlier this week, with demand very close to overtaking supply. National Grid’s 1-hour forecast for de-rated margin (the difference between available generation and demand) was negative for two hours on 18 July – i.e. demand was forecast to outstrip supply. This saw two Capacity Market Notices (CMN) issued – which are automatically issued when the de-rated margin falls below 500MW. These were subsequently cancelled, as the market responded by increasing the level of available generation during the evening peak.

In the late evening, the low supply caused the chance that the system demand would exceed supply, known as Loss of Load Probability (LOLP), to surge to 69.5% from 0% earlier in the day. The unprecedented temperatures impacted the level of available generation due to lower combined cycle gas turbine (CCGT) efficiency as well as the heat swelling transmission lines – lowering their ability to carry power. This was exacerbated by low wind speeds, summer maintenance of thermal units and high exports to France, with a significant amount of French nuclear capacity currently offline. Tight system margins and CMNs are typically seen in winter during peak demand periods and are highly unusual in summer months. System tightness was reflected in prices, with imbalance prices surging to £691/MWh at 19:00 on 18 July.

While 19 July saw a similar level of demand over the evening peak, there were more comfortable supply margins amid an increase in wind and open-cycle gas-turbine generation. However, imbalance prices remained high due to the cost of maintaining these supply levels, peaking at £774/MWh at 19:30 on 19 July – the highest level seen since March.

Figure 1: Systems margins over 18 and 19 July

Source: Cornwall Insight

Luke Ansell, Analyst at Cornwall Insight said:

“Despite relatively low demand compared to winter, the heatwave and subsequent inefficiency of generation and supply, caused the electricity market to become incredibly tight. This increased the potential of the supply not being able to keep up with demand, something which in a worse case scenario, could cause short term blackouts in parts of GB.

“On top of this, the need to balance the system and ensure sufficient electricity supply, meant energy had to come from more expensive places, causing MWh prices to surge, something our current market can ill afford.

“Rising temperatures across GB and Europe are a concern as climate change threatens to make these weather occurrences more frequent. Over the next few years, the market will need to evolve to manage resources and deliver a flexible system capable of coping with what is likely to be a long-term issue.”


Notes to Editors

For more information, please contact: Verity Sinclair at v.sinclair@cornwall-insight.com

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About the Cornwall Insight Group

Cornwall Insight is the pre-eminent provider of research, analysis, consulting and training to businesses and stakeholders engaged in the Australian, Great British, and Irish energy markets. To support our customers, we leverage a powerful combination of analytical capability, a detailed appreciation of regulation codes and policy frameworks, and a practical understanding of how markets function.