European power prices dip in December as wind generation hits records

Paul Boughton

Day-ahead electricity prices in Continental Europe dipped in December as mild temperatures, strong winds and stormy weather produced wind power records in Germany, France and the UK, according to data just released by Platts, a global energy, petrochemicals and metals information provider.

The Platts Continental Power Index* (CONTI) fell 0.4 per cent in December 2013 to €46.80 per Megawatt hour (/MWh) compared to the November 2013 rate of €47.00/MWh, when calmer winds and colder temperatures suppressed wind power and boosted electricity prices. Year-over-year the index was up 8.8 per cent.

The price decline was more marked in Germany, where the average day-ahead baseload price in December fell 10 per cent month over month to €35.71/MWh. On a daily basis, December was a month of extremes for Germany, with day-ahead base prices closing on December 10 and 11 at less than €60/MWh – the highest over-the-counter levels seen all year – only to fall to its lowest level December 24 to €0.50/MWh.

“Last month’s European power prices demonstrate growing price volatility observed in the winter months due to the capricious nature of the wind,” said Henry Edwardes-Evans, Platts associate editorial director of Power in Europe. “When wind power generation drops, Europe’s power system often falls back on expensive natural gas-fired generators, and prices rally. When the wind blows, prices can actually turn negative as wind operators continue to feed subsidized power into the grid, despite the market signal.

“The overall effect has been volatile but generally lower wholesale power prices,” Edwardes-Evans said. “The average CONTI Index price for 2013 was €43.34/MWh, down 13 per cent from 2012’s €50.00/MWh.”

In the UK, day-ahead baseload power prices were stable in December on a month over month basis, but were up 6.5 per cent year over year. With only two cable interconnections to France and the Netherlands, the UK’s exposure to mainland European power surpluses is limited, and UK power prices have been significantly higher than in other northwest European markets.

UK day-ahead natural gas prices also extended gains seen in November, rising 1.4 per cent month over month to end the year nearly 5 per cent higher than the December 2012 average.

At Continental Europe’s most liquid natural gas trading hub, the Dutch TTF, the average price of day-ahead natural gas in December was €27.68/MWh, up only slightly from November and up 1 per cdnt year over year.

“European natural gas prices were at their highest at the start of December, when there was a cold spell and reduced Norwegian production,” said Alex Froley, Platts energy analyst. “They then trended steadily lower across the course of the month on the back of mild weather and the Christmas/New Year holiday period, which kept demand in check.”

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* Platts Continental Power Index (CONTI) is a demand-weighted baseload average of day-ahead contracts assessed in Germany, Switzerland, France, Belgium and the Netherlands. The Platts U.K. assessments reflect day-ahead contracts assessed for firm delivery of power on the high voltage network of England, Wales and Scotland, and at the National Balancing Point for gas. The Platts assessments reflect prices as determined between buyer and seller in the open physical market

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