AleaSoft, December 14, 2020. In the third week of the month, the prices will drop in most European electricity markets because the demand will be lower and the renewable energy production will increase. In the second week of December, the prices of most markets rose, reaching averages above €50/MWh. In most of the continent, the demand increased and the wind and solar energy production fell, factors that joined the rise in gas, coal and CO2 prices to favour the increases in the electricity markets.
Photovoltaic and solar thermal energy production and wind energy production
The solar energy production between Monday, December 7, and Sunday, December 13, decreased in most of the markets analysed at AleaSoft compared to the previous week. In the Iberian Peninsula, the production reduced by 33%, while in the German market it was 29% lower. In the French market the week ended with a production 9.3% lower than the previous week, while, on the contrary, in the Italian market it increased by 7.8%.
For the third week of December, the AleaSoft‘s solar energy production forecasting indicates that the solar energy production in the Spanish, Italian and German markets will increase compared to the second week of December.
Source: Prepared by AleaSoft using data from ENTSO-E, RTE, REN, REE and TERNA.
Source: Prepared by AleaSoft using data from ENTSO-E, RTE, REN, REE and TERNA.
During the week ended on Sunday, December 13, the wind energy production increased by 37% in the Iberian Peninsula compared to the previous week. On the contrary, in the Italian, French and German markets, the productions with this technology fell between 2.5% and 29%.
For the end of the third week of December, the AleaSoft‘s wind energy production forecasting indicates an increase in the markets of Germany and France. On the contrary, a reduction in wind energy production is expected in the rest of the markets analysed at AleaSoft. 
Source: Prepared by AleaSoft using data from ENTSO-E, RTE, REN, REE and TERNA
Electricity demand
The electricity demand increased in most of the European electricity markets during the week of December 7 when compared to that of the previous week, due to the fact that at the beginning of the week the temperatures were generally lower. On the other hand, the demand fell in the markets of Germany, Spain and Italy, in the last two cases favoured by the effect of the Immaculate Conception holiday.
In the third week of the month, the demand is expected to fall in most of the markets due to the temperatures being less cold.
Source: Prepared by AleaSoft using data from ENTSO-E, RTE, REN, REE, TERNA, National Grid and ELIA.
European electricity markets
The week of December 7, the prices of most of the analysed European electricity markets increased compared to those of the previous week. The exceptions were the MIBEL market of Spain and Portugal and the IPEX market of Italy, with decreases of 17% and 0.8% respectively. On the other hand, the market with the highest price increase, of 27%, was the Nord Pool market of the Nordic countries, followed by the EPEX SPOT market of Belgium, with an increase of 16%. In contrast, the markets with the lowest price increase, around 7%, were the N2EX market of Great Britain and the EPEX SPOT market of Germany.
The second week of December, the weekly average prices were above €50/MWh in almost all the analysed European electricity markets. The exceptions were the Nord Pool market and the MIBEL market, with average prices of €23.14/MWh and €39.02/MWh respectively. On the other hand, the highest average, of €66.93/MWh, was reached in the N2EX market.
As for the daily prices, on Wednesday, December 9, the highest values of the week were reached in almost all European markets. On that day, the daily prices exceeded €70/MWh in Germany, France, Italy, Great Britain, Belgium and the Netherlands. The highest daily price of the week, of €85.73/MWh, was reached in Great Britain. This daily price was the highest since November 2018 in this market.
Source: Prepared by AleaSoft using data from OMIE, EPEX SPOT, N2EX, IPEX and Nord Pool.
The week of December 7, the general decline in wind and solar renewable energy production favoured the increase in prices in the European electricity markets. But, in the case of the MIBEL market, the increase in wind energy production in the Iberian Peninsula contributed to the decrease in prices. On the other hand, the recovery in fuels prices and the increase in demand due to the drop in temperatures also exerted their influence on the evolution of the European electricity markets prices during the second week of December.
The AleaSoft‘s price forecasting indicates that the week of December 14 the prices of most of the European electricity markets will fall. The decrease in electricity demand and the recovery of the wind and solar energy production in some countries will contribute to these decreases. However, price increases are expected in the MIBEL market of Spain and Portugal, favoured by the fall in wind energy production in the Iberian Peninsula and by the recovery of the demand in Spain.
Electricity futures
During the second week of December, the behaviour of the futures prices for the next quarter in the European markets analysed at AleaSoft was predominantly upward. The EEX market of France and the NASDAQ and ICE markets of the Nordic countries were the only markets in which there were decreases in price compared to the settlement of the previous week, on Friday, December 4. In the rest of the markets the increases are between 0.6% of the EEX market of Germany and 4.6% of the EEX market of Great Britain.
Regarding the electricity futures prices for the year 2021, the behaviour was very similar, an almost general increase in which the Nordic countries, both in the ICE market and in the NASDAQ market, were left out, both registering decreases of 5.1 %. The EEX market of Great Britain was also where the largest increases were registered for this product, with a 4.9% increase. In the rest of the markets the increases were in any case above 2.0% that marked the EEX market of France.
Brent, fuels and CO2
The settlement prices of the Brent oil futures for the month of February 2021 in the ICE market, the second week of December, remained above $48/bbl and were higher than those of the same days of the first week of the month. The maximum settlement price of the week, of $50.25/bbl, was reached on Thursday, December 10. This price was 3.2% higher than that of the previous Thursday and the highest since the beginning of March.
The start of the distribution of vaccines against COVID‑19 in various countries is generating confidence in the recovery of the demand and allowing the increase in prices. However, the OPEC+ agreed to increase its crude production as of January. Nevertheless, after the Christmas celebrations, the evolution of the pandemic could worsen in many countries and new confinement measures may be necessary. In this sense, the Algerian Minister of Energy said that the OPEC+ would meet again on January 4 to assess the market situation.
On the other hand, the attacks on two oil wells in Iraq on December 9, although they did not significantly affect the country’s production levels, raise concerns about the security in Iraq, also exerting their influence on the evolution of the prices.
Regarding the TTF gas futures prices in the ICE market for the month of January 2021, on Monday, December 7, they registered a settlement price of €14.36/MWh, 2.0% lower than that of the last session of the previous week. But the rest of the second week of December, the prices registered an upward trend. As a result of this trend, the settlement price of Friday, December 11, was €15.96/MWh. This price was 9.0% higher than that of the previous Friday and the highest since January.
The API 2 coal futures prices in the ICE market for the month of January 2021 had a similar behaviour to those of the TTF gas. In this case, the settlement price of Friday, December 11, was $66.50/t. This price was 4.6% higher than that of the same day of the previous week and the highest since the end of November 2019.
As for the settlement prices of the CO2 emission rights futures in the EEX market for the reference contract of December 2021, the first days of the second week of December, they were below €30/t. However, on Thursday, December 10, there was an increase of 4.0% and the settlement price reached the maximum value of the week, of €31.12/t. The news about the progress in the European Council negotiations for the approval of the new greenhouse gas emission reduction targets favoured this price increase. On the other hand, the threat of strikes in the French nuclear sector and the low temperatures may also contribute to keeping the CO2 emission rights futures prices high.
Source: Prepared by AleaSoft using data from ICE and EEX.
AleaSoft analysis of the evolution of the energy markets and prospects from 2021
On January 14, the first webinar of the year 2021 organised by AleaSoft will be held. In addition to the AleaSoft speakers, this time there will be speakers from PwC Spain. One of the topics that will be discussed is the vision of the PPA market for the consumers, how it evolved in the Spanish market, its importance as a risk management tool, source of savings and commitment to the environment, as well as the aspects to consider in the contracting process. The prospects for the energy markets in the mid and long term from the year that begins will also be analysed.
The AleaSoft‘s reports of forecasting for the European electricity markets provide in‑depth analysis of the markets evolution prospects in the coming years, taking into account the recovery scenarios from the current economic crisis. These forecasts are hourly and have a horizon of up to 30 years, also including the annual confidence bands with a probabilistic metric, necessary for the risk management.
Source: AleaSoft Energy Forecasting.
