May 2019 could well be the month that the UK’s energy transition took hold. It was good news story after good news story, unless, of course, you owned a coal-fired power plant.

Or, indeed, were an energy trader hoping for a quiet bank holiday weekend.

Over the last bank holiday weekend, an “extraordinary turn of events” saw the UK’s power price turn negative for nine consecutive hours, a new record run for the country’s wholesale market. Demand for power slipped to 2GW below forecasts which, when combined with surging wind generation, saw prices fall to as low as -£71.26/MWh. In total, one 24-hour period saw 11 hours of negative power pricing, and the average system price for power on Sunday 26 May stood at -£12.16/MWh.

Put bluntly, if you owned a power station on that day without any guaranteed pricing arrangement, you stood to lose money.

Those events only served to underpin power price trends for month in total. Rarely was the wholesale price above £50/MWh and the average price throughout May 2019 stood at £39.47/MWh, according to Drax’s Electric Insights tool. For comparison, May 2018’s average system price was almost exactly £10 more expensive at £49.34/MWh, as was May 2017’s at £49.24/MWh.

In years to come, the energy sector may fondly remember May 2019 as the month coal fell off the grid, but in reality the level of change has been far starker, and the demands placed on grid operators and generators alike have evolved.

Negative pricing is not a new phenomena. A concerted spell of negative prices has already impacted the UK this year, most notably in March when a similar turn of events to those experienced last weekend sent prices into the red for six hours. Germany, with its higher penetration of renewables, witnessed some 134 hours of negative pricing in 2018 alone.

But what, perhaps, is new is the embracing of negative pricing as an opportunity, rather than an unfortunate side-effect of the clean energy transition.

Traders are having to be more hands on than ever before. Last weekend saw prices on energy exchanges go even lower than the -£71.26/MWh system price as traders feared that the pricing trend would continue downwards. And as supply continued to outstrip demand, National Grid was forced into action, ramping up its balancing activity. Most notably, the Thanet offshore wind farm off the south Kent coast received an instruction to turn down at -£135/MWh during the midst of the negative stretch.

In total, National Grid paid out some £6.6 million for grid balancing on Sunday 26 May, essentially 22-times the £300,000 it’d paid out the day before.

Yes, these numbers have been driven somewhat by freak events. Even the most forward-thinking of energy professionals have described them as unprecedented. But as the transition accelerates and our relationship with demand and supply patterns changes, so too will the markets that underpin it. Research and analysis firm Cornwall Insight has forecasted that periods of negative imbalance pricing could spiral over the next 15 years, becoming so prevalent that more than 10% of half-hourly settlement periods could produce negative prices by 2034.

This isn’t to say that networks are at any great risk – National Grid has long since argued it has the right suite of tools to manage these kind of instances, and is now confident it will be capable of operating a net zero electricity grid as early as 2025 – but it does throw up some interesting debates for the future of low carbon power in the UK.

A monthly average wholesale price south of £40/MWh might be good news for consumers, but it won’t exactly be welcomed by developers of subsidy-free renewable plants. Any entity looking to finance a utility-scale solar farm sans subsidy will tell you merchant risk is probably the biggest remaining obstacle to bringing a project to fruition, and trends for falling power prices will only make that hurdle harder to jump. Renewables in that sense are at risk of cannibalising themselves, fears which have been raised by the renewables sector for some time now. In that sense, the sector will be watching the ongoing Contracts for Difference auction, during which offshore wind prices are expected to reach historic lows, with great interest.

But at the other end of the spectrum instances like these throw greater weight behind the argument that the power sector no longer truly values generation, but flexibility. The ability to ramp your demand or output up or down and respond to what the grid truly needs, rather than just churn out power and turn off occasionally, is where the market is unquestionably headed.

Last weekend provides a snapshot of that. If you owned a large-scale battery, it was a big bank holiday weekend indeed. If you charged between the hours of 4pm and 5pm when prices were around -£60/MWh and discharged just six hours later when prices were £40/MWh, you were effectively paid some £100 per unit. That’s Hinkley Point C money.

Speaking to Current± last week, aggregator Limejump said that any smart trading strategy stood to deliver great revenue during periods of southward energy prices like last week. Battery storage operators were “definitely happy recipients”, the company said.

But chuck more battery storage and other flexible generators onto the grid, and the system stands to regulate itself. Negative pricing shouldn’t be seen as a problem in need of a solution, but instead an indication that we aren’t going flexible fast enough.

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