18 July 2022
As the UK braces itself for record breaking temperatures today and tomorrow, Rajiv Gogna, Partner in LCP's Energy team, commented: “Record breaking heatwaves doesn’t mean that our energy crisis disappears. Today we are seeing pricing in GB peaking at £553/MWh, this is a 58% increase on this time last week when we saw prices at £350/MWh. The UK is not the only victim of this trend with France and the Netherlands also experiencing increases around 45%.
“These price rises are being driven by a number of factors. The first is that in these extreme heatwaves, grid systems see huge spikes in demand as a result of increased energy usage for cooling systems across the country. But a key driver and concern for those in the industry is that at the temperatures we are seeing across the UK and Europe, much of the energy systems are simply less efficient and can’t deliver the normal power capacity. In this heat CCGT run less efficiently and so we are actually seeing units redeclare their maximum export limit through the day, with this being reduced in all cases. This has culminated in a capacity market warning this afternoon. This is also the case for nuclear, particularly in France where it makes up a higher proportion of energy generation, where the warmer water means that reactors can’t cool down as efficiently.
“Renewables can also suffer in this heat. In the UK we are seeing solar peaking around 7.5GW, which is actually down on what was being generated two days ago at cooler temperatures. Solar panels are simply less efficient when operating at extreme temperatures. In these high pressure weather systems which are driving the heat up we also see less wind, and therefore wind generation is down too.
“All of these factors raise concerns about the future energy system and increase the need for a diversified energy generation system which, as a whole, can operate across different scenarios. This needs to be supported by short and longer duration energy storage such as battery and hydrogen which can plug in and help to provide short term demand during these spikes. While much focus on energy policy for the future has focused on how we provide energy during the winter, particularly in keeping our homes warm, it must also look at the scenarios we are experiencing today, ensuring the UK has the right mix of generation for summer too!”