Following record high power prices earlier this week, a fire at the IFA1 interconnector in Kent could cause power prices to rise further.
IFA1 is a 2,000 MW interconnector that links Great Britain and France, and while it has recently been at half capacity, it was set to return to full capacity this weekend, before tragedy struck.
A major fire impacted the GB side of the interconnector, with 12 fire engines on-site to deal with the blaze. While the extent of the damage is yet to be fully realised, it is likely to delay IFA1’s return to full capacity – at a time where it is desperately needed.
That’s because Britain is currently facing an energy crunch with limited supplies, low margins and soaring power prices. On September 14, day-ahead pricing reached a record high, with a peak energy price of £2,500 per MWh, which is significantly higher than the £40 per MWh average baseload price during 2019-20.
Prices on September 15 cleared lower but still at an extreme price of £1860 per MWh for the evening peak, but prices on the remaining interconnectors for capacity were extreme, with the Britned cable clearing at €2131 per MW/h.
Data from energy market analyst EnAppSys shows that in the year to date, overall average power prices have been more than double the average price in 2019-2020 and in the last two weeks daily average prices have been eight times the average in 2019.
Phil Hewitt, director of EnAppSys, commented, “This fire at IFA1 is a major event; we could be looking at an extended outage. In the long run, we will lose 2GW of import to the GB markets whilst we are struggling at the moment with low margins. The immediate effect is that since IFA1 was on half capacity anyway, we have only lost 1GW for this current period of extreme prices – it was due to return to full import at the weekend. Today the tight market will be affected. Tomorrow a forecast tight market will become really tight; expect even higher prices in the spot markets going forward.
“With margins tight anyway for this winter, as exposed by National Grid ESO’s early winter outlook publication this year, it puts the GB market in a risky position for the winter and especially if we suffer from periods of low wind and cold temperatures. National Grid had a projected derated margin of 4.3GW in its early winter outlook report; this looks like it may have just almost halved.
“On the other side, France has now got a net extra 2GW of available supply so this should help prices on the continent.”