London (Platts)--12Dec2012/1229 pm EST/1729 GMT

The UK has resorted to record levels of oil-fired power generation, forcing within-day power trade to levels in excess of GBP250/MWh Wednesday, as demand surges to its highest levels since February, according to Platts data.

Oil-fired power ramped up over the afternoon to reach 1.2 GW, or 2.3% of the total generation mix at 1500 GMT, the first time it has moved beyond the 1 GW mark since December 2010, Platts Powervision data shows.

The move to more expensive oil-fired power is believed to have a direct impact on the UK's within-day electricity market, as power for delivery Wednesday evening between 1700 GMT and 1900 GMT was last heard trading at GBP258/MWh, a trader said.

On Tuesday, Platts closed peakload power for day-ahead delivery at GBP63.05/MWh.

"That's the impact that Littlebrook [oil-fired power plant] is having on within-day prices at the moment," a UK power trader told Platts.

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"[The National Grid] was warming Littlebrook last night for earliest synch sometime this afternoon," the trader said.

"It's purely a capacity thing," he added, explaining that many of the UK's gas-fired power plants are kept on short-term reserve contracts with the National Grid.

Fossil-fuel power generation surged Wednesday as severe cold weather conditions across the UK's more densely populated southeast England region caused demand for gas and power to surge to levels not seen since February, while low wind generation, an unplanned nuclear outage and increased exports to Continental Europe constrain supply.

GAS-FIRED POWER TESTS 2012 RECORD

As a result of the cold, gas-fired power generation in the UK tested record highs Tuesday evening and may surge further over Wednesday's peak power demand hours as favorable clean spark spreads and subdued low carbon generation bolsters its share of the generation mix, Platts data shows.

Tuesday evening saw gas-fired generation touch highs of 20.731 GW amid peak demand levels of 56.65 GW, narrowly missing this year's highest gas-generation contributions so far at 22.351 GW seen February 3, according to data from Platts Powervision.

Wednesday evening peak daily power demand is expected to push 1.4 GW higher than Tuesday's levels to reach highs of 58 GW, which when combined with more favorable market conditions could see February's record levels tested, traders said.

At 1600 GMT, gas-fired generation reached 20.5 GW or 36.9% of the generation mix, while coal-fired power stood just slightly higher at 23.2 GW.

Just a week previously, coal had dominated the generation mix at 22.4 GW while gas-fired power contributed just 13.5 GW.

"I believe day-ahead peak demand [for Wednesday evening] is forecast to be the highest since February, so the gas plants are needed on system," the power trader said.

"Gas plants are generally always needed on the system -- it's just the lower efficiency ones are needed at the moment too," he said.

CLEAN SPARK SPREADS SOAR

Prior to December's surge in electricity demand, gas-fired power generation fell to its lowest levels recorded due to unfavorable market conditions, weighing on the potential profits from gas generation.

However, as day-ahead baseload power prices lifted over 10% and the UK's NBP gas market turned bearish amid an oversupply of gas, clean spark spread prices rocketed to just over three times the year-to-date average, Platts data shows, supporting greater gas-burn.

Platts measures the profitability of gas-fired generation against the cost of emissions allowances and fuel costs through its day-ahead clean spark spread which surged to GBP6.5689/MWh by Tuesday's close for power plants at 50% efficiency.

Tuesday's close stands in stark contrast to the November average price for the day-ahead clean spark spread at just GBP1.88/MWh, up slightly from October's GBP1.31/MWh average.

In September this year, gas-fired generation hit 14-year lows as day-ahead clean spark spreads plunged into negative territory at an average price of GBP-0.29/MWh amid a perfect storm of strong wind generation and low overall demand.

The average year-to-date clean spark spread is GBP2.137/MWh, according to Platts data.

--Jillian Ambrose, jillian_ambrose@platts.com
--Edited by James Leech, james_leech@platts.com

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