UK power balancing costs in July forecast up 78% on year to GBP232 million

UK power system balancing costs in July are forecast to be 78% higher year on year at GBP232 million ($284 million), National Grid Electricity System Operator data showed June 22.

UK balancing costs have been rising sharply since September 2021 due to much stronger forward curve contracts, inflating the cost of procuring energy to cover system stability needs.

"The forecast was produced based on a forward price curve derived on June 6, 2022," the ESO said.

Platts assessments priced UK front-month baseload power at GBP159.70/MWh that day, up 115% year on year, S&P Global Commodity Insights data showed, with season-ahead contracts assessed at GBP241.75/MWh, up 193%.

Looking further ahead, the ESO forecast balancing costs of GBP1.55 billion for the six months to end-November, flat year on year on historically high levels.

Monthly costs rocketed last October and November to GBP317 million and GBP542 million, respectively.

For this winter, National Grid ESO noted it had recently entered into a bilateral agreement with EDF for the 2-GW West Burton A power station to provide additional coal powered generation if required.

"We are still in talks with other generators so are unable to provide a forecast of costs at this stage. We will provide further information in due course," it said.

A spokesperson for the ESO said the operator was in talks with Uniper and Drax with regard to keeping coal capacity at Ratcliffe-on-Soar (2 GW) and at Selby (1.2 GW) available this winter.

Coal units at Drax and West Burton A were due to close at the end of their capacity market contracts in September, while Uniper had planned to close a 500 MW unit at Ratcliffe-on-Soar as early as September this year as well.