UK capacity market ‘back in play’

The UK capacity market is back with 3 auctions in the space of 5 weeks in Q1 2020. We look at the UK capacity balance & why prices may surprise to the upside.

Timera Angle

Tommy Rowland joins Timera

Tommy has joined Timera as an Analyst.  5 facts about Tommy:

Smartest – Market Analyst: Tommy joins Timera from Smartest Energy where he was a Market  Analyst working on fundamental analysis of power & gas markets and using machine learning to develop prompt trading & backtesting strategies.

Smartest – Volume Risk Analyst: Before this Tommy was working on Smartest Energy’s long-term generation and supply portfolio imbalance position, as well as supporting the development of new supply products.

Solar Century: Prior to Smartest Energy, Tommy started his career with solar developer Solar Century.

Education: Tommy has a MSc. Materials for Energy & Environment from UCL and a BSc (Hons.) Biochemistry from University of Kent. He’s also done an Applied Data Science course with Cambridge Spark.

Other stuff: Outside of work, Tommy enjoys playing Padel Tennis, and like some other members of our team is a keen sailor.

Tommy brings strong market and analytical skills as well as practical commercial experience from his industry background.

Jon Brown joins Timera

Jon Brown has joined Timera as a Senior Analyst.  5 facts about Jon:

EDF – Quant Analyst: Jon joins Timera from EDF Energy where he was a Senior Quant Analyst, with responsibility for analysing the impact of embedded optionality of flexible assets as well as developing analytical tools (e.g. battery optimisation).

EDF – Risk: Before this Jon was a Senior Market Risk Analyst at EDF Energy, working on developing & implementing risk measurement & portfolio limit solutions (e.g. using EaR, VaR).

South Hook LNG: Prior to EDF Jon was a Senior Optimisation Analyst for Sth Hook terminal, responsible for pricing all 3rd party cargo deals & developing a probabilistic analytical framework to support this.

Education: Jon has a degree in Financial Economics (Hons) as well as other qualifications in financial engineering & risk management (e.g. GARP, CISI Derivatives, CFA)… and he’s a Python ‘black belt’.

Other stuff: Outside the office Jon is a keen triathlete, has run the London marathon and is a bit of a card sharp (sponsored poker player).

Jon brings strong quant analytical skills which are grounded in practical commercial experience from his industry background.

Steven Coppack joins Timera

Steven Coppack comes onboard Timera as a Senior Analyst.  5 things Steven has done prior to joining our team:

Total – Energy trader: Creating and executing trading strategies across European power and carbon markets, including building analytical models to aid trading strategies.

Total – Market analyst: Delivering analysis of European power, gas & carbon markets to senior management. Generation stack modelling to analyse power price dynamics in European markets.

EDF – Shift trader: Managing & optimising short-term UK power and gas exposure of EDF Energy’s UK thermal generation fleet.

EDF – Analyst: Conducting analysis to support customer product structuring and pricing of PPAs for renewable generators.

University: Steven has a MPhys in Physics and Philosophy with First Class Honours from the University of York.

Steven brings strong practical commercial & analytical experience from his industry roles, particularly on European power markets.

Timera is moving office

When? On 1st Sep 2019 Timera Energy is moving offices from its current 110 Bishopsgate address.

Where? We are moving to Level 12, 30 Crown Place (the Pinsent Masons building), 5 mins from our current address.

Why? Timera is growing fast (more exciting news to follow shortly).  We need more desk & meeting room space to accommodate our expanding team and client base.

What next? Full details on new address and contact details to follow before the move.

Timera is recruiting analysts

As we continue to expand our team, we have several Analyst positions open.  Why join Timera as an Analyst?

  1. The Challenge: Your focus will be on understanding & analysing the flexibility that lies at the core of the energy transition.
  2. Development: We have a flat hierarchy where analysts interact dynamically with senior team members and clients and have the space to apply initiative and take on responsibility.
  3. Remuneration: Our packages are very competitive and include participation in company growth.
  4. Flexibility: We offer significantly more flexibility and autonomy than other companies, covering e.g. location, work hours & remuneration structure.
  5. Team culture: We have an open, innovative & entrepreneurial environment, working together on a variety of stimulating analytical challenges across the rapidly evolving energy industry.

See Analyst Job Spec and more details on Working with Timera.

New Managing Director joins Timera

We continue to expand our team with May Mannes joining as a new Managing Director.  5 things May has done prior to joining our team:

S&P Global Platts: Director of Content focused on gas & LNG market analysis post acquisition of Eclipse Energy.

Eclipse Energy: Director of Gas & LNG Analysis and of Advisory Services, developing Eclipse before sale to S&P Global.

Statoil: Senior commercial roles across gas & LNG, including managing parts of Statoil’s existing gas contract portfolio & responsibility for long term sales.

Alliance Gas: Head of Business Operations responsible for balancing the trading, end users and wholesale portfolio.

Athletics: British Universities Champion 200m sprint… so she’s pretty quick!

May will focus on developing Timera’s gas & LNG business across asset investment, value management and market analysis.

Our Team: May Mannes

Timera Snapshot

How do flex power assets generate revenue?

5 key asset types are competing to provide incremental flexibility in the UK capacity market. But the breakdown of revenue drivers varies significantly by asset type. The chart shows a summary of the proportion of wholesale & BM revenues earned from 1. ‘price level’ (e.g. intrinsic spark spreads for CCGTs; cross border price spreads for interconnectors) 2. Intra-day price shape and 3. Spot price & BM volatility.  We show a full build up of £/kW revenue stacks for each capacity type in the feature blog article we publish next Mon.

Intermittency driving UK power price volatility

A look at a case study from Jan-2019 illustrates how renewable intermittency is already a significant source of spot power price volatility in the UK.  Day on day wind generation across the evening peak caused prices to fall by almost 40 £/MWh.  The addition of 25-30 GW of intermittent capacity to the UK system by 2030 will sharply increase system flex requirement.  This is a structural driver supporting investment in flexibility (e.g. gas plant, batteries & DSR).

Record gas storage inventories

The chart shows European storage capacity 99% full entering winter. Inventories are well above historical 5 year min/max range shown in grey. High storage inventories are a key factor behind plunging TTF spot prices over last 3 months (price falling sub 10 €/MWh – lowest levels in 10 years). With storage full and the power sector ‘switched out’, sharp price declines are required to absorb surplus gas at European hubs (e.g. to incentivise higher cost switching or fast cycle storage injection).

Spanish LNG imports rise as NWE falls

Last week we showed a steady decline in European LNG imports volumes since the Apr peak. The chart shows 2 interesting trends behind this. Imports into NW Europe’s liquid hubs (UK, FR, NL, BE) have declined significantly since Apr-19. But Spanish import volumes have continued to rise. High volumes of gas for coal switching in the power sector are allowing Spain to absorb additional LNG, spurred by low gas prices.

European LNG imports retreat from peak

LNG import volumes into Europe set a new record in Apr-2019. But the chart shows volumes have receded back to Q4-18 levels since then. The JKM / TTF spot price spread remains at levels around 0.5 €/MWh, indicating an ongoing surplus of LNG flowing to Europe. Despite a reduction in LNG volumes, European hub prices have remained under pressure across Q3. This has been exacerbated by limited remaining power sector switching potential and very high storage inventories. LNG import volumes into winter will be important to watch.