Insights / Q2 Electric Insights

Electric Insights – latest developments in British electricity generation

Electricity generation in Britain witnessed major changes in the second quarter of 2023. Installed wind capacity, power prices and carbon emissions all played their part in a rapidly shifting situation. Discover how and why in our latest Electric Insights report.

Electric Insights is produced quarterly by a team of independent academics at Imperial College London. It’s aim is to provide an objective overview of the developments that have taken place during the last quarter.

Want to read the full Electric Insights report for the second quarter of 2023? Download it at the end of this article.

Electric Insights – latest developments in British electricity generation - Image

Wind generation reaches largest capacity of any kind of power station

For the first time in over 100 years, fossil fuel was overtaken by wind as the dominant form of installed generating capacity. As a result, Britain became one of only five countries with wind capacity at the top of their generating mix – joining Denmark, Finland, Ireland and Spain.

This represents a genuine revolution as gas has been Britain’s largest source of power capacity for the last decade. While coal had dominated for the century before that, it is now down to a mere 2 GW. Gas capacity reached a peak of 30GW in 2010, but has been in decline since then.

In contrast, in the last ten years, Britain’s wind generating capacity has increased threefold. It’s almost evenly split between onshore (14.1 GW) and offshore (13.8 GW) farms. This is the result of a massive investment of around £60 billion – almost £1,000 for every person in the country.

Development of new wind generation capacity stalls

Against the backdrop of wind generating capacity reaching the top of the charts, Vattenfall suspended development of its 1.4 GW Norfolk Boreas project off the east coast. The company ascribed inflation for the decision, claiming that costs had risen by 40% in just a year. This meant that the price Vattenfall had accepted in the auction for the project may not have been high enough to enable them to make a profit.

Fossil fuel generation falls to a new low

In the last quarter, fossil fuels produced their lowest levels of electricity since the COVID-19 lockdown. At 22 TWh, the figure is 9% less than the previous non-lockdown low, recorded at the start of 2023.

The figure was higher than it might have been. Maintenance had taken half of the UK’s nuclear fleet offline, while high prices for pellets meant that many biomass generation units were unprofitable to run. Lower wind speeds also meant wind farms suffered a 16% fall in generation compared with the same period in 2022. Without these factors, fossil fuel generation would have been 6 TWh lower.

Carbon emissions from electricity generation fell to their lowest level ever outside lockdown – below 10 million tonnes of C02 for the quarter. Carbon emissions hit a three-year low, falling below 150g/kWh in May – only the second time this has ever happened.

Power prices fall

Over the year to June 2023, power prices fell by 40% – to an average of less than £80/MWh in May. On April 10, Britain also saw the daily-average price for electricity drop to less than £0 – the first time in almost three years.

UK carbon prices sink

The UK’s carbon price has also fallen – by a third – and now trades at its largest ever discount to Europe. Since Brexit, the UK has operated its own emissions trading scheme (ETS). And while, in the past, this remained largely in line with its EU equivalent, recently prices have begun to diverge. Traders are now inferring that it will be significantly easier for the UK to meet its targets than for the EU to meet those it has set. In turn, this could make it more attractive to export power from the UK to the EU. In the long term, the most important aspect of this decision is what it may suggest about the government’s commitment to bearing the costs of decarbonisation.

If you’d like a copy of this quarter’s independent Energy Insights report, please download it here.

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