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UK sees drop in renewable generation in Q2, despite higher electricity demand

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The electricity market in the UK went through a rough patch during Q2 2021, according to the latest market research from EnAppSys. 

Demand for electricity is continuing to increase in-line with the relaxation of Covid restrictions, with day ahead prices more than 15% higher on average in Q2 than they were in Q1. 

In fact, day ahead pricing was as high as £72, with imbalance or system price sitting at £74.85/MWh, the highest of any quarter since EnAppSys started recording this data in 2011. 

Pricing wouldn’t have been as high had cheaper renewable energy not suffered from a drop in production, mostly caused by the calm, cloudy weather. In fact, renewable generation saw a 2% drop in Q2 when compared to Q1. 

Due to the drop in renewable energy production, gas power plants had to fill the gap. It was the dominant generator of electricity in Q2, contributing 41.2% to the fuel mix in the quarter, followed by renewables with 32.3%, nuclear with 16.4%, imports with 9.3% and coal with 0.8%. 

Coal continues its phase-out with Drax units 5 and 6 now closed for commercial generation, although they remain open for activity in the Capacity Market (CM) while the government brings forward the coal phase-out date from October 2025 to October 2024.

Paul Verrill, director of EnAppSys, said, “The periods of tight system supply resulting from recovering demand, combined with less renewables and less available margin from thermal generation and interconnectors, resulted in periods of extreme prices. With higher carbon prices increasing the overall market price, the overall average market price that ultimately feeds into what consumers pay increased significantly in the quarter.

“System prices peaked at £1971.59/MWh in mid-April when spinning reserve became as tight as 1.3GW. The combination of several factors led to this tight period and high prices, most notably the trip of IFA2, lower renewable generation than forecast and the fact that BritNed was already offline.”

While coal continued its irreversible decline in the second quarter, levels of nuclear generation also fell from the previous Q2, prolonging a Q2-on-Q2 decline since the second quarter of 2017. The main reason for the reduction from Q2 2020 was that Sizewell B1 and B2, Hunterston Generator 8 and Heysham 2-7 were offline for long periods between April 1 and June 30, 2021.

The tight system in the most recent quarter meant that imports were required more than they had been in Q2 last year, when higher wind meant the system was less tight. Imports accounted for 6.09TWh this quarter, up from 4.59TWh in Q2 2020. In addition, as a proportion of the total generation, imports accounted for 9.3% of generation in the quarter, up from 7.9% in Q2 last year.

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