After a record-breaking year of success for renewable energy, this month’s Bryt Insight starts the new year by highlighting the UK Government’s new action plan for decarbonising the grid by 2030. While we are looking forward, we also reflect on the past year, celebrating significant milestones that have been hit at the end of 2024, such as records that have been set in wind generation and renewable energy’s share in electricity.
Here’s what you need to know this month:
December has been a month of two halves, with the declining prices in the first half of the month leading to the ‘front annuals’ (which are the annual prices from the next 2-3 seasons) falling to 6-week lows. This fall in wholesale electricity prices is because of strong renewable generation forecasts and a large portion of nuclear capacity that is back up and running after outages, both improving availability of supply, as well as falling gas prices. The news of extensions to the lifetime of four nuclear plants in the UK (Heysham 1 and Hartlepool until March of 2027, and Heysham 2 and Torness until March of 2030) and the possibility of extending Sizewell B power station up to 2055, also influenced the long-term prices.
In the second half of December, long-term prices increased, taking prices close to the highest points of 2024, and in some cases higher. These increases in the annual prices did not reflect the real availability of supply, but instead increased due to perceived risk in the market. It reflected the failure to agree a new deal to transport gas through Ukraine’s pipeline to the rest of Europe, which supplied 4-5% of the gas to the European Union (EU) last year. The more immediate increases in January 2025 and February 2025 prices reflected the extensions to time taken for maintenance on the French nuclear fleet and on two of the interconnectors between the UK and Europe, which reduced the availability of supply for this period.
In contrast to the downward movement of long-term prices at the start of the month, short-term prices were extremely volatile, especially for a three-day period from the 10th December, when prices spiked in the short-term markets. This was due to an average of only 2GW of wind generation being available for those days, compared to a daily average of over 10GW for the month. In the second half of the month, as the long-term prices increased, short-term prices started by decreasing away from the spike, due to increased wind generation and the return from maintenance of the nuclear fleet (as mentioned above) helping to boost supply availability, as well as decreased energy demand over the Christmas period. Subsequently, the colder weather towards the end of December saw demand increase again, raising prices with it.
It seems unlikely for long-term prices to fall in the next couple of months, without a change in one of the factors that are driving the high prices. The main driver, as usual in high electricity prices, is high gas prices (as electricity prices are still largely affected by gas prices). The high gas price is because of the lack of gas coming through the pipeline, after the transit agreement between Russia and Ukraine lapsed, and the recent cold weather meant that gas that was in storage in the EU was being used. These gas storage levels have dropped below 70%, which is below the 5-year average for this time of year. Ongoing maintenance on the French nuclear fleet, and two of the interconnectors between UK and Europe being out of service until next month, are also pushing prices up.
However, there is a chance that Liquified Natural Gas (LNG) imports might increase to the UK, which would improve the availability of supply and ease prices in the future. This may happen if the EU’s ‘Corporate Sustainability Due Diligence Directive’ legislation is strictly enforced; This may lead to companies, such as QatarEnergy, ceasing to supply LNG to the EU, which could mean an increase in LNG imports to the UK. Also, if Japan goes ahead with providing incentives to restart nuclear reactors after having shut them since the Fukushima disaster in 2011, this may also increase LNG imports to the UK, as it will reduce the need for LNG in Japan for electricity generation. This should help reduce electricity prices in the UK, by lowering the cost of gas generation when renewables may be unavailable, and therefore reducing any uncertainty over supply.
The price of REGOs has remained stable over December, with very little movement in any of the compliance period prices for the next 3-4 years.
Following on from the National Energy System Operator’s (NESO’s) publication of the Clean Power 2030 report, the Department for Energy Security and Net Zero (DESNZ) have announced their Clean Power Action Plan. This builds on the recommendations detailed in NESO’s report by creating a pathway to reach a completely decarbonised energy system by 2030, with three key aims:
NESO’s Clean Power 2030 report highlighted that, in order to reach a decarbonised electricity grid by 2030, the UK’s offshore wind capacity will have to increase from 15GW to 43GW-50GW, onshore wind will have to grow from 14GW to 27GW, and solar energy will have to increase by three times, from 15GW to 47GW. To achieve the 2030 target, the Government’s plan emphasises the need to upscale renewable and nuclear energy generation capacity, while improving energy security and embedding flexibility. In successfully executing these plans, gas-fired power plants will only make up 5% of Britain’s electricity mix by 2030. The plan states that an estimated £40 billion of energy investment will be required per year between 2025 and 2030, and that key parts of the electricity networks and connections must be reformed to allow more renewables onto the grid.
Although it’s clear that much is to be done to achieve a decarbonised energy system by 2030, it’s good to see decisive action that aligns with NESO’s recommendations. You can read more about the Government’s action plan, here1.
First three contracts in Government scheme for green hydrogen have been signed
Contracts for green hydrogen projects located in Cromarty, Whitelee, and West Wales have been signed by the Low Carbon Contracts Company (LCCC), marking the first Government-backed contracts to be signed for the production of green hydrogen in the UK. Green hydrogen is a low-carbon alternative to natural gas that can be used in heavy industry and various hard-to-abate sectors, and is a vital step in decarbonising industries that cannot be easily electrified.
These three contracts have a capacity of 31.8 megawatts (MW) combined, and are part of the first round of the UK Government’s first scheme to provide long-term revenue support for hydrogen projects – Hydrogen Production Business Model Scheme’s Allocation (HAR1)2. The contracts will be followed by eight others that were also part of the HAR1, which will be signed later this year. Similar to the framework seen in the Contracts for Difference (CfD) contract allocations, the Hydrogen Production Business Model Scheme is intended to accelerate the development of the green hydrogen industry and decrease the risks of investment.
Our parent company, Statkraft, also have a number of green hydrogen projects in the pipeline, and we anticipate their contribution to helping the UK reach net zero by 2050. To read more about Statkraft’s green hydrogen projects, visit here.
Negative price periods in Britain have increased six-fold
Research has revealed that negative price periods have increased six-fold in frequency between the years 2022 and 20243. Negative price periods happen when supply is greater than demand, which can result in lower electricity prices for consumers, but can equally cause financial strain for energy generators. The research found the imbalance between supply and demand of energy to be due to decreasing energy demand in the UK and across Europe, coupled with strong economic incentives for renewable energy generation from legacy support schemes.
Since 2010, increases in energy efficiency and reduced output in certain industries has led to a decrease in energy demand by 20%. Although this is expected to change with the electrification of sectors such as heat and transport, delays in electrification have caused the impacts of this to be slower than expected. While older Government support schemes for renewable generation still financially support assets in times of negative pricing, current versions of CfD contracts no longer do this – therefore encouraging assets to respond to negative pricing by curtailing, or “turning off”, their energy generation. Although this is intended to avoid the impact of negative pricing and reduce stress of the grid, this also results in wasting potential renewable energy which could have otherwise been used in other ways, such as in energy storage or the production of green hydrogen.
Although negative pricing may look positive on the surface, increasing negative price periods may make investment in renewable energy generation less appealing. Suppliers and businesses, who forward hedge for their supplies, are also adversely affected by the negative prices if they under-consume. However, the optimisation sector has been able to take advantage of these negative price periods, increasing margins for assets such as Battery Energy Storage Systems (BESS), and therefore increasing the appeal of technologies that provide greater flexibility in the transition to net zero.
To read more about this research, visit here.
Extreme weather could cause 7% decrease in earnings by 2035 for unprepared corporations
Businesses that fail to take climate-resilient precautions are predicted to see a 7% decrease in annual earnings by 2035, according to recent research4. $560 billion per year in asset losses is anticipated to be caused by extreme weather, due to the resulting impact of lower productivity from workers, decreased agricultural yields, damage to infrastructure, and the decline of various ecosystems. Sectors such as energy companies and telecommunications providers, which are asset-heavy, are predicted to be amongst those who will suffer most.
With last year being the hottest on record globally5, it’s clear that the threat of climate change is not distant, and action cannot be postponed without considerable financial repercussions. Nevertheless, the report emphasises that there are many ways that business leaders can take precautions against extreme weather and simultaneously take advantage of opportunities – starting with comprehensive climate risk assessments. Other actions outlined in the report include investing in physical resilience against changing weather, decarbonising assets and operations, as well as consistently monitoring and reporting on risks and progress. In addition, the research states that markets focusing on sustainable and adaptation offerings will grow from $5 trillion, as of 2024, to $14 trillion in 2030, with their early action providing a competitive edge.
UK wind generation breaks record twice in one week
The National Energy System Operator (NESO) has confirmed that, within a matter of a few days, the UK has set two new maximum wind records6. On 18th December at 3:30am, 22.5GW of electricity was generated by wind power, breaking the UK’s record of 22.2GW, which was set just a few days earlier on 15th December at 6:30pm. This meant that during this period, a significant 68.3% of the country’s electricity was provided by offshore and onshore wind power.
Renewable energy reached record high in 2024
Following on from the record-breaking wind generation, recent analysis from Carbon Brief has revealed that renewable energy has overtaken fossil fuels in the UK’s electricity mix, with fossil fuels contributing just 29% of the electricity mix, while renewables made up a record-breaking 45%7. As well as the increase of renewables on the grid, we also saw the phasing out of coal power at the end of September 2024; both of which contributed towards each unit of electricity generated last year emitting an average of 124g of CO2 – a huge decrease compared to 419gCO2 per kilowatt hour (kWh) a decade earlier.
This is the first time ever that renewables have contributed the majority of electricity generated in the UK’s electricity mix, surpassing fossil fuels, for an entire year in full – a milestone achievement for renewable electricity!
A four-nations approach to wind energy projects is vital, new report highlights
A new report from the Institute for Public Policy Research (IPPR) has highlighted the need for a coordinated approach to the building of onshore and offshore wind power, in order to speed up development and reach a decarbonised energy system by 20308. This is particularly important as:
The report suggests a framework which can help tackle barriers to collaboration and coordination between the UK Government and the devolved nations of Scotland, Northern Ireland and Wales. The measures suggested include establishing joint high-level commitments to ensure renewable energy generation targets are aligned, and working collaboratively on devolved issues, such as planning and skills, by sharing each nation’s best practices with each other, to increase the speed of wind energy deployment.
Construction begins for Statkraft’s Swansea electricity grid stability scheme
The first electricity grid stability scheme in Wales, Statkraft’s Swansea Greener Grid Park, has now commenced construction. The project equates to around £70 million of investment in the energy transition in Wales. The Greener Grid park will help create inertia, using six large rotating stabilisers. Inertia is needed to prevent disturbances to the electricity grid, so Greener Grid Parks help reduce reliance on fossil fuels for stabilising the grid.
This project is one part of Statkraft’s wider strategy to strengthen the UK’s energy infrastructure, which has almost 20 projects with planning consent and is in the process of developing other renewable and low-carbon schemes. As well as renewable energy generation projects, it’s equally as important that infrastructure such as Greener Grid Parks are provided investment, in order to support a grid that can handle an increasing amount of renewable electricity.
To read more about Statkraft’s electricity grid stability scheme in Swansea, visit here9.
Statkraft explains how their team responded to extreme weather damages and turned the lights back on in Wales
Statkraft have released an article exploring the recent Storm Darragh’s impact on electricity infrastructure, which saw damage from the extreme weather causing large parts of the grid in Wales to trip. The damage to infrastructure led to large parts of Wales losing power, leaving thousands of homes without electricity for multiple days. This resulted in a generator in Statkraft’s Rheidol Hydropower Scheme to be automatically turned off due to protection settings.
When it was safe again to work, Statkraft’s team began addressing the damage. In collaboration with NESO and SP Manweb, who support the transmission network, they worked to get Rheidol back online, which allowed power to be supplied to Mid and North Wales for nearly 48 hours, solely from Rheidol.
Statkraft’s future plans mean that Rheidol Control Centre will eventually be directing up to 45% of Britain’s entire grid stability services. The hard work and quick thinking shown from Statkraft’s operations and maintenance team will become even more important as climate change causes extreme weather, and the impacts of it, to become increasingly frequent.
To find out more, read Statkraft’s article, ‘How Statkraft’s team at Rheidol turned the lights back on in Wales’, here10.
If you have any questions on how any of the updates might affect your business, our team of experts is on hand to answer them. You can get in touch with us on 0330 053 8620 or at heretohelp@brytenergy.co.uk.
