Electricity cheaper, cleaner and harder to control over lockdownPower prices fell to their lowest in nearly two decades, with prices down two-thirds over the last two years hitting a low of £22/month over May.
Under lockdown, electricity was “cheaper, cleaner, but harder to control”, power company Drax found in its most recent Electric Insights report. Published on 31 August, it found that the share of renewables’ was up 32% year-on-year as biomass, wind and solar set new generation records in Q220. Wholesale power prices declined by 42% from the same quarter last year as demand plummeted during lockdown.
With cheaper electricity prices, power prices fell to their lowest in nearly two decades, with prices down two-thirds over the last two years hitting a low of £22/month over May. The total cost of generation (based on wholesale prices plus balancing charges) fell from £3.0bn to £1.7bn over the three months.
Prices were driven lower by the fall in oil and gas prices over the last year, as well as by falling demand due to the COVID-19 lockdown.
COVID has resulted in demand being around 4GW lower across this quarter than Drax would have expected without lockdown.
On carbon emissions reductions over this period, Drax found that coal saw a period of 67 days (10 April to 16 June) straight without generating. May saw no coal generation in the entire month. Solar supplied an average of 2.7GW of power during May, surpassing 10% of the month’s electricity demand.
Drax pointed to high levels of sunshine over the period as a factor. Renewables’ share in the power system rose from 30% in Q219 to 40% in Q220, Drax found.
Carbon emissions from electricity generation were found to have fallen below 10mn tonnes – 75% lower than the same period a decade ago. Carbon intensity hit a new low of just 18 g/kWh in the middle of the Spring Bank Holiday.
Drax said that clear skies with a strong breeze meant wind and solar power dominated the generation mix.
Drax also considered the cost for National Grid ESO to balance the system, both during lockdown and over a longer period.
Drax said that the costs of balancing usually amount to 5% of generation costs , but this share has quadrupled over the last two years (see Figure 1).
In the first half of 2020, the cost of these actions averaged £100mn per month. At the start of the 2010s, balancing added about £1/MWh to the cost of electricity, but last quarter it surpassed £5/MWh for the first time. Balancing prices have risen in step with the share of variable renewables, Drax said.