Spreads shrink on falling power

摘要

UK power prices have fallen over the past two weeks. Whether this is in response to the general softening in international commodities prices or simply a correction to their recent jump is not yet clear. However, with coal and gas prices also falling, many fundamentals support further downwards pressure. That said, the capacity margin is still tight, with a number of generating units still offline. Whilst the National Grid is confident there is sufficient plant available, the margin for error still looks tighter than would be desired. This shortage of capacity is underpinning current high prices, so even falling fuel prices may not be enough to see the same relative reduction in the power price.