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Markets & Trading This week Grid secures 3.5GW of SBR capacity National Grid plays down fears of blackouts as SSE and Engie sign five backup capacity contracts National Grid has secured more than 3.5GW of backup capacity for the supplemental balancing reserve in the winter of 2016/17. Utility Week reported last week that Centrica, Eon and ESB had signed the contracts they were offered in December, and that Engie had signed one of two. National Grid has since released an update revealing that SSE has signed four of the five contracts it had been granted. They include a contract for 646MW of de-rated capacity from its Peterhead combined cycle gas turbine plant and a 422MW contract for its Fiddler's Ferry coal- fired plant. However, the big six supplier turned down one contract for 30MW of gas turbine capacity from its Fer- rybridge plant. The only contract that remains outstanding is for 24MW of gas turbine capacity at Engie's Rugeley plant. A spokeswoman for the company said the delivery of that contract depended on the timing of the closure of its coal-fired plant at the site, which was announced last month. Earlier this month National Grid played down fears of blackouts in the coming winter aer a forecast was published predicting supply shortfalls in 11 weeks of the season. A spokesman said the backup capacity secured through the SBR was not included in the projections used in the forecast and could help to fill any shortfalls that arose. TG ELECTRICITY Day-ahead volumes up in February Trading volumes continued to grow on APX's Power UK day- ahead market in February, very nearly reaching 5.6TWh. It marks an increase of more than 53 per cent on February last year, and a rise of 4 per cent on January. The growth came from trading in the main day-ahead auction, where volumes rose to almost 5.4TWh. Volumes in the half-hour 15.30 auction remained broadly similar to those seen in the previous month, at 214GWh. Intraday trading on the continuous UK market fell by more than 100GWh to just over 1.2TWh. Day-ahead volumes on EPEX SPOT markets across Europe, including those run by APX, totalled nearly 42.7 TWh – a year- on-year increase of 10 per cent. ENERGY Gas and power prices down 8% UK gas and power prices were down 8 per cent in February compared with the previous month, according to price reporting firm Platts. The National Balancing Point day-ahead gas price averaged 29.54 pence per therm over the month, a year-on-year decrease of 41 per cent. The effects of a cold snap in the final week of the month was more than offset by healthy supplies. Average month-ahead gas prices dropped 9 per cent on January to 29.17 pence/therm, as a "bearish prompt-delivery environment, combined with low oil prices, put pressure on the near curve". At £33.23/MWh, average day- ahead power prices were down 22 per cent year-on-year. Warmer than average temperatures drove demand down to 25TWh, a 2TWh reduction on January. ENERGY 2016 carbon price to be €6.6 per tonne The European carbon price will average €6.6 per tonne in 2016, according to the Point Carbon team at Thomson Reuters. "We expect the shaken mar- ket confidence to result in a slow recovery," said head of EU car- bon analysis Marcus Ferdinand. EU Emissions Trading System allowances shed about 45 per cent of their value in the first two months of the year. Last month the price fell to a 22-month low, which analysts attributed to a mild winter, speculation and a glut of permits. Although the surplus cur- rently stands at 1.7 billion, the EU has been removing allow- ances from the market to bring it down – a process known as backloading. See graph below SSE signed a contract for 646MW from Peterhead UTILITY WEEK | 11TH - 17TH MARCH 2016 2016 | 29 Markets 4 -262 -154 0 -27 -214 -83 -33 -43 -231 -206 -133 -68 -64 -54 -28 Source: Thomson Reuters The EU has been removing allowances from the carbon market in an attempt to get rid of a huge surplus, currently standing at 1.7 billion. A balancing mechanism known as the market stability reserve will be created in 2019 to provide a long-term solution. The Point Carbon team at Thomson Reuters have projected that, as a result, the market will start to near a balancing point by 2030, with a scarcity of allowances pushing the carbon price up to €26 per tonne. Balance and reserve (Mt) Reserve Annual balance charge Balance 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 0 -500 500 1,000 1,500 2,000 2,500 3,000