Short-term power prices in Europe soared again Wednesday even as a forecast of warmer temperatures and higher winds bring signs of relief from the region’s first major test of winter.
(Bloomberg) — Short-term power prices in Europe soared again Wednesday even as a forecast of warmer temperatures and higher winds bring signs of relief from the region’s first major test of winter.
Intraday prices in France traded at more than €600 ($638) per megawatt hour for some half-hour periods, with levels in Germany and the UK not far behind. It’s the price Europe is paying this winter for its reliance on natural gas to keep the lights on when cold snaps coincide with windless conditions.
“Despite this grim scenario for the week, we could see that the electricity system is coping relatively well with the situation, albeit power prices suffered a significant increase,” analysts at RBC wrote in a note.
Relatively little power is sold in the intraday market compared to the much larger market for longer-term contracts where most electricity is guaranteed. But it’s where the system is fine tuned to make sure supply meets demand.
The tight market should ease by the weekend when temperatures are set to rise in much of northwest Europe and the UK, cutting demand for gas to heat homes. At the same time, wind speeds are forecast to increase, ending a period of calm weather that has added to dependence on gas and coal in the power grid.
And the French nuclear fleet is still trending in the right direction to avoid catastrophe this winter. Electricite de France SA has steadily turned on more reactors this month, even if behind schedule, with generation inching closer to a level that would be normal for this time of year.
Still, in a sign of how delicate the electricity balance is, capacity on a power connection between Norway and the UK was cut by about a third until Friday. The cables are key to Britain’s energy security this winter, with imports hitting a record earlier this week.
European carbon prices edged lower to about €88 per metric ton after trading above €90 earlier this week for the first time since August. The move follows an agreement in Brussels overnight to tap the carbon market to raise up to €20 billion to help fund plans to cut demand for natural gas.
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