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UK: Negative pricing period due to exceptionally low demand

  • United Kingdom
  • Energy and infrastructure - Clean energy

26-05-2020

Market data indicates that UK day-ahead power prices were negative for prolonged periods (up to 17 hours) on the bank holiday weekend of 23-24 May 2020. While generators will hope that this is a rare occurrence due to the exceptionally low demand caused by COVID-19 (see our previous bulletin here), industry stakeholders will be aware that such periods may occur on a more frequent basis in the future, especially on days of low demand and high wind.

We therefore encourage stakeholders to take note of the revised negative pricing proposals in the current Contract for Difference (CfD) consultation which closes on 29 May 2020, which if implemented would mean that difference payments are not made to generators during any negative pricing periods, i.e. the current 6-hour requirement would no longer apply.

Furthermore, industry participants in the global physical power markets will want to ensure that their power purchase agreements adequately cover the consequences in relation to negative power price periods and any related balancing actions, to ensure an equitable outcome between the generator and the offtaker (e.g. ability to curtail and/or revenue sharing relating to any balancing actions).

Michelle T Davies, Partner
Jean-Pascal Boutin, Partner
Simon Davies, Principal Associate
Ben Brown, Senior Associate

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