European power prices rebounded in March from the lows seen in February, but remain significantly below March 2015 levels as reduced feedstock and carbon costs added bearishness to a healthy supply picture, according to data released by energy analyst Platts. Continental European day-ahead prices climbed 3.4% to €25.83/MWh in March compared to February, but on a year-over-year basis the index was down 32.8%.
German wind power is firmly entrenched as the key fundamental in near-term European continental power price formation. In a slightly colder, calmer March, a dip in wind output prompted the average day-ahead power price in Germany to rise 8% to €24.17/MWh. However the monthly average price was down 22% compared to the March 2015 level of €30.96/MW.
In natural gas, the European market continued to trade sideways through March, before weakening in early April. A healthy supply picture pushed prices downwards towards the Continental coal switching price – at which point natural gas becomes competitive with coal in power generation.
Platts’ regional analysis of European power and gas markets showed the following. In Germany, wind output in March was barely more than half of February’s record, and down 19% year on year. Solar lagged last year’s output. March was the first month since October 2015 to see wind output dip below 10 terawatt hours (TWh). On average, wind turbines generated 8.7 GW each hour in March, down from 15.2 GW in February.
In France, day-ahead baseload power averaged €26.93/MWh in March, up 3% on February as temperatures fell below seasonal norms, prompting electric heat demand. Year over year, however, French prompt prices were down nearly 40%, reflecting the steep decline in power-related commodity costs.
In the UK, day-ahead power edged up 2% to £33.89/MWh in March compared to February, but was down 16% in comparison to March 2015. A strong rise in gas-fired power generation amid reduced wind generation was behind the modest strengthening, which was offset by an early Easter holiday period.
For UK gas, National Balancing Point (NBP) day-ahead gas prices were in line with February levels, but remained substantially lower from a longer-term perspective. They were down 37.36% on a 12-month basis, on the back of continued bearish fundamentals of ample supply and weak oil prices. Supply to the UK increased from both Norway and the Netherlands.
In the Netherlands, on the TTF, continental Europe’s most heavily traded gas hub, gas spot prices averaged €12.243/MWh through March, down 1.3% from February and a full 44% lower on a year-over-year basis. Weather was generally a bearish factor as it was for the whole winter season, with temperatures only rarely providing scope for price upside.
As of April 6, several factors helped gas storage operators to inject gas into stores at a stronger-than-anticipated rate, reducing the ‘sink’ available to the market later this year when liquefied natural gas (LNG) deliveries are expected to ramp up. Such factors included the lack of a significant reduction in Russian natural gas flows into northwest Europe, a sharp turn up in Algerian flows to Italy, and a cut in exports from west Europe to Ukraine.
More information at <http://www.platts.com>
