(Bloomberg) -- Power prices surged after the UK’s grid operator issued a market warning for this afternoon as declining wind output crimps supply just as plunging temperatures boost demand.
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The three-hour notice period began at 4 p.m. London time when there was an insufficient buffer between predicted supply and demand, the National Energy System Operator said. The notice was canceled at 4:19 pm and the system is operating normally, according to a NESO spokesperson.
Intraday power prices rose as high as £1,778.34 ($2,196.7) per megawatt-hour at 5.30 pm London time on Wednesday, according to Epex Spot SE data.
The warning was made by the grid operator “using operational and engineering judgments” and gives the market more time to adjust than an automatic alert four hours in advance. It’s one of several issued this winter and highlights the risk of building out wind turbines without sufficient back up for days when it’s dark, cold and windless.
A tight market has been an opportunity for some power plants to profit from high prices offered by the grid operator to ensure there’s enough generation when margins are particularly tight. Late last year, a pair of gas-fired power stations each earned over £1 million in a handful of hours when the wind was barely blowing. The British regulator Ofgem brought in new rules to prevent operators from changing generation plans within the same day, so they now have to make a bet a day ahead that doesn’t always pay off.
“NESO’s options are relatively limited,” said Shiv Malhotra, a senior consultant at LCP Delta. “The majority of the UK’s power plants are already running at full capacity.”
A sharp drop in wind generation just as colder weather causes an increase in demand for heating is putting pressure on the power system. Wind output has dipped even lower than expected this afternoon, falling below 3 gigawatts.
Gas is picking up the slack, with the country’s plants generating about 25 gigawatts of power, short of the record of nearly 28 gigawatts set in December. Average temperatures are forecast to be just above freezing Wednesday, well below the 30-year normal for this time of year.
Britain is connected to markets like France, the Netherlands and Norway by huge power cables that transport electricity. Scheduled interconnector flows from France to the UK have increased, according to grid data. A link between the UK and Denmark was also brought back from maintenance one day ahead of schedule Wednesday afternoon to help meet peak power demand amid the crunch.