GB Distributed and Flexible Energy Market Outlook – H1 2020

We are pleased to present our GB Distributed and Flexible Energy Market Outlook Report for H1 2020. This half-yearly update presents Aurora’s comprehensive view on the state of the market, and includes our latest outlook on capacity, wholesale, balancing, ancillary and local flexibility markets, showing how these can be monetised by flexible assets.

Thank you to our subscriber group members who informed the analysis, and we look forward to further engagement on the content with all of you going forward.

Key highlights from the H1 report include:

  • Growth in distributed and flexible energy remains strong, with 1.5 GW of battery capacity expected online by the end of 2020 and 5 GW of reciprocating engines contracted through the Capacity Market
  • COVID-19 has combined with already low gas prices to give decade-low power prices, while extreme lows in demand are leading to exceptional system management requirements for National Grid
  • Recent T-3 and T-4 Capacity Market auctions cleared at £6.44 and £15.97 respectively, with key surprises including drop-out of nuclear and CCGT capacity; prices are expected to increase to £20-£25 in the 2020s
  • While power price volatility appears to have declined in recent years, this is explained by gas prices and a lack of extreme events; fundamental changes in daily price shapes are expected over the next decade
  • Ancillary services are developing rapidly (though COVID-19 is delaying some processes), with roll-out of new frequency response products and Pathfinder projects looking to address imminent system challenges
  • Local flexibility markets continue to grow and standardise, with the Energy Networks Association developing standardised contracts for flexibility contracts in collaboration with the DNOs
  • Key uncertainties surround carbon pricing and network charging, with little clarity around what the post-Brexit carbon pricing regime will be and further reform to Use of System charging following the TCR
  • Aurora’s long-term forecast has been extended to 2050 for system-level outcomes; updates to the 2020-2040 forecast include lower gas prices, higher carbon prices, less nuclear capacity and more renewables

The report can be downloaded in PDF and the underlying data in Excel format from the download section of EOS.

This is subscriber-only content. To enquire about subscribing to our GB Distributed and Flexible Energy service, please get in touch.

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