Tricks of the trade, by Jillian Ambrose

“Didcot is another blow, but it is just a 700MW loss”

You could be forgiven for thinking that the dramatic Didcot shutdown this week resulted in similarly explosive moves on the UK’s electricity market. After all, every major news outlet issued the now familiar battle cry against impending blackouts. After a summer of unplanned outages at some of the UK’s biggest generating assets, the Didcot blaze is surely the final straw?

Well, yes and no.

Given the meagre amount of spare capacity available to the UK grid this winter, every megawatt counts.

But while the loss of Didcot is another blow to already hard-hit capacity margins, it is just a 700MW loss. Baroness Worthing­ton may have had a point when she said there’s no need for the “hysterical headlines” over the loss of a plant. And the markets back her up. In the days following the blaze, the word most used to describe wholesale power prices was “muted”. Pricing levels resisted the downward pull of bearish gas prices, yes, but they remained steady compared to the week before, with no sign of a rally in sight.

By contrast, few were wringing their hands over winter capacity following the nuclear outage news in balmy August, but the market reaction to the news was logically more significant than seen in the past week given that the Heysham and Hartlepool units combined represent more than four times the capacity of Didcot.

Further evidence, if we needed it, that the reaction of a market is quite often more rational than that of public opinion.