At the mercy of the winds - European power prices fall further despite gas market volatility [GGP]
European power prices continued to fall last week on strong wind power generation, and an overall fall in gas prices, despite high volatility caused by NS1 and NS2 leaks and potential sabotage.
The UK saw an especially large decline in prices, with very high wind speeds over the weekend bringing the average down.
The UK is also still benefiting from lower gas prices compared to the continent because it remains a major importer of LNG. This led to an average weekly spot price of €214 last week.
This is the lowest level since late June, and weekly average prices are now down by more than 60% since the peak in late August.
Preliminary generation data for September shows that Nuclear climbed past gas as the largest source of generation again, surpassing gas.
The data also shows that European power demand now has been cut substantially since last year, with a 5% reduction compared to last year
Last week also concluded the month of September, and as shown in Figure 1 below all major European markets saw a large decline in average monthly prices from August.
The exception is the Nordic market, which only saw a marginal decline.
In addition to being on a much lower level already, limiting the downwards movement potential, the biggest factor is still very low storage levels in the southern Norwegian hydropower reservoirs.
Norway has been importing power for large parts of September, to save water for the winter, which has impacted prices in both Norway and Sweden.
Italy remained the highest price of the large markets, averaging €436 in September, followed by France at €395, Germany at €346, the UK at €310, and the Nordic system price at €212.
Spain remained at much lower prices than the rest, caused by the gas and power price cap that went into effect in June, which therefore limited the price decline in September.
Preliminary generation data for September shows that nuclear power climbed past gas as the largest source of generation again.
The reasons include a comeback of wind power generation, as parts of September were much windier than August across the continent.
In general, the autumn and winter months have much higher wind speeds, which is expected to take some of the pressure off the gas market in the coming months.
Coal also stayed high, as this source of generation is still much cheaper than gas, as coal utilization currently is very high in Europe.
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