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Chart of the Week


Ramping up: demand levels, power prices and the outlook ahead

Sam Nicholls Year in Industry

With the recent easing of lockdown measures allowing the re-opening of many parts of the economy, in this Chart of the Week, we take a look at how his has impacted electricity demand and power prices. GB power prices for baseload electricity in recent weeks would suggest that the market has made a partial recovery already. The day-ahead power price (while typically remaining volatile) recently peaked at £33.10/MWh on 8 July, the highest price traded for the contract since pre-COVID lockdown. In a similar vein, front month power contracts are no longer in backwardation, (future dated contracts are lower than current contracts), whilst the annual October 20 contact is at its highest price since mid-January. The easing of lockdown measures has no doubt helped the market to lift from the substantial lows seen in the months of April and May. Here, the day-ahead power contract hit an all-time low of £10/MWh driven by the low demand. Significant drops in business and industry consumption pushed national demand as much as 15-20% lower than during the same period in previous years. Other seasonal factors have influenced demand, with mild weather and the sunniest April on record (so far as solar generation is concerned) exacerbating losses in the market. Steady price gains seen in June and July indicate that demand has risen with the easing of lockdown measures, amongst other things. Compared to 2019, July has so far seen 10% less power demand on average, compared with 15% lower throughout May. A less obvious driver for ...

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