Winter’s gas-fired power profits almost double

UK generators could see their profits from gas-fired power plants for the coming winter reach twice as high as market conditions suggested at the end of last year.

Price data from market experts at Icis shows that power generated in winter 2015 from gas plants was valued at an average of £2.41/MWh in October 2014 when the market first began trading significant volumes of both power and gas for the coming season.

But the August month-to-date average for this winter’s gas-fired power profits has already climbed by more than 86 per cent to £4.50/MWh, Icis price data shows.

The calculation for gas-fired generation earnings is known as a ‘spark spread’ when measuring the difference between the price of buying gas and selling power generated by a plant of standard efficiency. And a ‘clean spark spread’ includes the cost of offsetting carbon emissions.

Icis reported the highest ever clean spark spread for winter 2015 on 7 August at £4.54/MWh, just £2.33 higher than the equivalent measure for coal-fired power generation which usually offers a significantly cheaper option to the market. 

Since then the profits for gas-fired power have crept higher still to reach a fresh record of £4.56/MWh on 19 August, Icis data shows.

This could mean that UK generators use an increased amount of gas-fired power to meet the coming winter demand, with a lower share of the energy mix held by coal generating units. But Icis adds that generators planning to close their coal plants by the end of the winter, including Scottish Power’s Longannet plant, will have extra incentive to run the units to extract as much value as possible before they close.