UK monthly power balancing costs drop below GBP200 million in April

UK monthly power system balancing costs fell below GBP200 million ($249 million) in April for the first time since July 2021 as reserve energy and constraint costs eased, National Grid ESO data showed June 7.

Balancing costs have exploded over the past 12 months due to soaring forward power prices, pushing up the cost of procuring reserves.

In financial year 2021-22 (April-March), total costs of GBP3.13 billion were up 69% year on year.

In April, however, a return to something closer to normality was seen with total costs of GBP186 million, still up 43% year on year but with lower operating reserve and constraint costs versus recent months.

Constraint payments to gas-fired generators of GBP56.3 million were down 42% month on month while operating reserve costs (reflecting trades done to balance out shortfalls in supply) of GBP30.5 million were down 24% on month.

In terms of volumes procured, constraints in April amounted to 411 GWh while operating reserve amounted to 347 GWh, both down year on year from 629 GWh and 549 GWh, respectively.

Front-month UK baseload power prices averaged GBP183.27/MWh in April, according to S&P Global Commodity Insights, down from GBP260.88/MWh in March.

Balancing costs for May were on course to edge up on April, with National Grid ESO forecasting costs of GBP197 million, amid rising network constraints.