System Prices spike due to ‘Beast from the East 2’

System Prices reached or exceeded £1,000/MWh on seven occasions from 6 to 8 January due to cold weather brought on from the ‘Beast from the East 2’.

Highs of £4,000/MWh

The largest spike in System Prices was on 8 January, the System Price reached £4,000/MWh in Settlement Period 39 and 40 after a price spike earlier in the evening (Settlement Period 35) of £2,750/MWh.

Before January 2021, the highest System Price was £2,242.31/MWh during Settlement Period 37 on 4 March 2020. All of the periods with prices over £1,000/MWh were preceded by an Electricity Margin Notices (EMNs) issued by National Grid ESO which highlighted low margins between available generation and predicted demand.

What are System Prices?

System Prices (£/MWh), also known as Imbalance Prices, are applied to the energy imbalance volumes of BSC Trading Parties (MWh). The System Price determines a Party’s Account Energy Imbalance Charge; these are payments by Trading Parties for negative energy imbalance volumes (i.e. top-up), and payments to Trading Parties for positive energy imbalance volumes (i.e. spill).

Parties with positive energy imbalance volumes will benefit from the high prices seen at the beginning of January, as they are paid for this volume at the System Price. Parties with negative energy imbalance volume pay for this volume at the System Price, making their trading charges in the Settlement Periods with high System Prices more costly.

Electricity Margin Notices

National Grid ESO (NGESO) issued three EMNs last week, one per day from 6 January to 8 January 2021. EMN’s signify that electricity generation capacity is below the comfortable buffer for the electricity demand on the system.

An EMN does not mean that there is not enough electricity to meet demand, it means that NGESO would like a larger buffer of spare capacity, and a notification to the GB Market that more capacity is needed. There have been six EMNs issued this winter. All three EMNs preceded System Price spikes over £1,000/MWh and all were issued then later cancelled as capacity reached an acceptable level.

NGESO also issued a Capacity Market Notices (CMN) for the evening, Friday 8 January, which was later cancelled. CMNs are based on industry data and trigger automatically four hours in advance when NGESO’s safety margin falls below a certain point. The CMN encourages Capacity Market providers to pay close attention to any notices or instructions they may receive.

It is common for EMNs and CMNs to be cancelled after issuing as the market reacts to the notifications.

Where can I find out more?

System warnings

System warnings, including EMN’s are published on the System Warning page of BMRS  

You can also receive these notifications by email by signing up to System Warnings on the Elexon Portal

System prices

Elexon publishes System Prices within 15 minutes of the end of a Settlement Period on the BMRS System Buy and Sell Prices report.

We also publish a monthly System Prices Analysis Report, which provides data, and analysis specific to System Prices and the Balancing Mechanism. It demonstrates the data used to derive the prices.

De-rated Margin forecasts

Elexon also publishes De-rated Margin forecasts on the BMRS. The De-rated Margin measures the amount of excess supply above peak demand.

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