Research from Cornwall Insight’s Benchmark Power Curve, which forecasts the power market to 2045 under different net zero scenarios, highlights volatility in the wholesale power market is set to increase.
Its central case scenario predicts that the standard deviation of hourly wholesale prices could reach £41.8/MWh by 2030. In the high case scenario, hourly wholesale prices could reach £62.0/MWh. Coinciding with this is a sharp rise in the number of negative pricing events.
Tim Dixon, Wholesale Team Lead at Cornwall Insight, said:
“The wholesale power market has undergone a turbulent last 12 months. The initial shock of the COVID-19 pandemic caused energy and commodity prices to crash, but a resurgence in commodity markets and tight power supply margins this winter led to the highest and most volatile prices since the Beast from the East in 2018 and French nuclear issues of 2016.
“With recent trends and the impacts of increasing renewables penetration, which was heightened by the COVID-19 induced low demand environment last year, it is no surprise that market volatility is anticipated to rise as we move towards a net zero power system.
“Negative pricing events are expected to see a particularly sharp rise throughout the 2020s as more offshore wind sites commission under the Contracts for Difference scheme to support the government target of 40GW of offshore wind by 2030.
“As more intermittent renewables commission, such plants will also face greater price cannibalisation. This is particularly the case in our forecasts for wind assets which are expected to see the largest capacity growth.
“While the last twelve months have seen some unique drivers from COVID-19, these trends are perhaps expected to become more typical as we move towards a decarbonised electricity system.”
About the Cornwall Insight Group
Cornwall Insight is the pre-eminent provider of research, analysis, consulting and training to businesses and stakeholders engaged in the Australian, Great British and Irish energy markets. To support our customers, we leverage a powerful combination of analytical capability, a detailed appreciation of regulation codes and policy frameworks, and a practical understanding of how markets function.
