Utility Week

UTILITY Week 27th March 2015

Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government

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Page 28 of 31

Eclipse watch Energy markets across Europe held their collective breath on Friday 20 March as the much-anticipated solar eclipse seemed set to hit solar output in what was described as an unprecedented challenge for transmissions system operators. While heavy cloud cover in the UK muted the impact on the country's relatively small fleet on installed solar farms, German solar output showed a stark cut to solar power over Friday morning. Bloomberg produced a chart to illustrate the supply disruption, but said there was only a "brief surge" in market prices. UTILITY WEEK | 27Th March - 2nd aprIL 2015 | 29 Markets & Trading This week LNG imports triple as Asian price plummets Low demand in previously lucrative Far Eastern market means improved security of supply in UK Monthly imports of liquefied natural gas to the UK could be three times as high as they were last year as competition from Asia fades. The UK's gas market has been forced to compete with the more lucrative Asian market for its share of global LNG supplies since 2010, but lower demand- led prices in the Far East this year mean security of gas supply in the UK has improved. The UK has imported nine cargoes of LNG in March, and market specialists at Icis say at least another four are expected to arrive before the month's end. Icis head of LNG Ed Cox told Utility Week that the UK imported five cargoes in March last year. "Nine LNG cargoes arrived at the UK's LNG terminals by 18 March. Four more LNG arrivals are expected at Milford Haven until month-end. However, more cargoes could come on top of this," Cox said. The UK market is more competitive because of historic losses in the Asian LNG market. Energy market specialists at Platts assessed the index price for LNG in Japan and Korea at almost 60 per cent below where it was this time last year. "The year-on-year drop was largely attributed to weaker-than-expected demand from buyers in northeast Asia, where both electricity generation and utility gas usage are down on fairly mild temperatures over the winter, and slowing economic growth," Platts said. Platts saw a record year-on-year plunge of 61.7 per cent averaged from mid-January to mid-February. JA ELEcTrIcITY Generator faces capacity auction ban Ofgem has banned generator UK Capacity Reserve from submit- ting 11 of its generating units into the UK capacity auctions for the next two years aer the company submitted false information in the first round of the auction. The regulator said 11 of UKCR's 96 units that were submitted into the auction did not have planning permission, which is a basic requirement of competing for a support contract through the auction process. As a result these units will be excluded from future auctions for the next two years, it said. "Accurate information is vital to the proper functioning of the capacity auction and partici- pants should exercise care over their submissions," Ofgem warned. National Grid, which oper- ates the auctions, removed the relevant units from the first auction round held late last year, so the invalid submissions were not included. The UK government finalised the results of its first capacity market auction in the first week of January, confirming that more than 60 per cent of the £1 billion guaranteed payment mecha- nism will be paid to operators of existing generation units over those investing in new plants or demand-side response. ELEcTrIcITY Eon threatens to close Killingholme Eon has pulled its 900MW Kill- ingholme power plant from the market before the UK's capacity crunch this winter, warning that it could make the closure perma- nent unless it secures a supply contract from National Grid. Eon said it would pull the gas-fired plant from the grid, adding that it had tendered for a winter supply contract that could make the plant economi- cally viable. The threats come mid-way through National Grid's tender process to decide which plants will be offered sup- ply contracts to secure winter supply availability as part of its multi-million pound supplemen- tal balancing reserve (SBR). Eon's chief executive, Tony Cocker, said "without support from the SBR contract, per- manent closure is a real and present risk to Killingholme". Market conditions have dete- riorated for thermal plants in the UK and across Europe as subsi- dised renewable energy drives the market price for generated power lower while relatively expensive gas keeps the costs of generating high. To maintain security of sup- ply as the UK's surplus margins dwindle, National Grid offers its SBR contracts to plants that can remain on standby for times of system stress. Warm weather has cut Asian demand for LNG 20000 15000 10000 5000 0 00:00 08:00 16:00 18 Mar 2015 00:00 08:00 16:00 00:00 08:00 16:00 18889.0 19 Mar 2015 20 Mar 2015

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