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SEM Chart of the Week

2020

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The Pain: SEM prices get low

James Goldsmith
James Goldsmith Senior Consultant (Ireland)

It is easy to forget that this weekend is Easter where a large part of the country will have a 4-day weekend. The Easter break usually results in a drop in electricity demand, with early starts being replaced by lie-ins and afternoon meetings becoming a hard-earned nap on the on the couch.

This year the demand levels are still trending down as restrictions due to COVID-19 become ever tighter. So what will this mean for the electricity generators?

This week’s chart takes a look at what could become a norm this summer in the electricity industry, having to pay people to take power.

Hit the floor

Negative day ahead prices are usually associated with overnight periods, when large plant ramp up to be on for the morning peak. This ramping up can drive prices to zero or below zero as they attempt to make that money back during the day.

The chart in Figure 1 shows the Day Ahead Prices for electricity in SEM last Sunday (5th April 2020) where Day Ahead prices were negative for most of the day, with Intraday pricing fairing no better.

The day-ahead market started the day at -€6.0/MWh, before falling as low as -€14.5/MWh at 2:00pm. Overall, the day saw 20 of the hourly settlement periods outturn negative, with the remaining periods positive over the day’s peak (highlighted blue in Figure 1).

Similar movements were observed in the intraday 1 market, which saw intraday prices fall as low as -€16.6/MWh at 2:00pm, with 36 of the days half hourly settlement periods negative on the day.

This led to both markets averaging negative on Sunday for the first time, at -€2.5/MWh for day-ahead power, and -€4.6/MWh for the intraday 1 market.

Next thing you know

Ultimately this means that the industry was paying people to take power, and if metering and tariff structures allowed, my Netflix binge would have been a lucrative one.

This Easter weekend is likely to have similar fundamental price drivers, reasonably warm days, very low demand and high wind levels over some periods.

The question that instantly arises when an event of this nature occurs is whether this will become the new normal when there are even more renewables on the system. The answer is a mixed one, yes with a maybe and a but.

One thing is for certain though, a summer of low gas prices leading to low electricity prices, coupled with negative pricing on high wind days, may see some generators struggling for cashflow come August.

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