AleaSoft, July 16, 2020. The prices in most European electricity markets continued to rise during the last days of the first half of July, mainly due to the decrease in wind energy production and the CO2 prices that remain high. The exception was the MIBEL market, where the wind energy production increased, causing a drop in prices that reached the second lowest value on the continent. The upward price trend is expected to continue at the beginning of the fourth week of July.
Photovoltaic and solar thermal energy production and wind energy production
The solar energy production decreased in most of the markets analysed at AleaSoft during the period between Monday, July 13, and Wednesday, July 15, compared to the average of the previous week, the number 28 of the year. The French market was the one with the greatest decrease, with a variation of ‑14%. In the Italian market it decreased by 6.4% and in the Iberian Peninsula by 1.7%. On the contrary, in the German market the solar energy production increased by 3.3%.
During the 15 days elapsed in July, the solar energy production was higher in all the markets analysed at AleaSoft compared to the same period of 2019. The highest growth was registered in the Iberian Peninsula, where it increased by 66%. In the rest of the analysed markets, the increase in production was between 4.6% and 18%.
For the week 29 of the year, the analysis carried out at AleaSoft indicates that the generation with this technology will decrease in the analysed markets.
The average wind energy production increased by 33% in the Iberian Peninsula between Monday and Wednesday of the week of July 13 compared to the average of the week of July 6. On the contrary, in the markets of Germany, France and Italy it decreased by 72%, 30% and 2.0% respectively.
From July 1 to 15, the wind energy production was higher in most of the markets analysed at AleaSoft compared to the same days of 2019. The largest increase was 56% in the Iberian Peninsula. In the French market it increased by 39% and in the German by 8.6%. In the Italian market the production with this technology remained with little variation during these two periods, decreasing by 0.3%.
By the end of the week of July 13, the AleaSoft‘s analysis indicates that the total wind energy production of the week will be lower than that of the previous week in the main European markets, except in the Iberian Peninsula.Source: Prepared by AleaSoft using data from ENTSO-E, RTE, REN, REE and TERNA.
The electricity demand decreased from Monday to Wednesday of the week of July 13 in most analysed markets. The difference that stood out the most was the 6.5% drop in France, due to the French National Day holiday on Tuesday, July 14. When correcting this effect of the holiday, the variation represented a slight increase of 0.1%. Other markets that had decreases in demand during this period were Belgium, Germany, Italy and Spain, which registered variations between ‑1.0% and ‑2.8%. The demand maintained the upward trend of recent weeks in Portugal and Great Britain, with growths of 4.2% and 1.3%. In the case of the Netherlands, there was an increase of 1.3%.
At the AleaSoft’s electricity markets observatories, the evolution of the demand in recent weeks can be analysed, with daily updated data.
The AleaSoft’s demand forecasting indicates that, at the end of the week of July 13, the demand will maintain the same behaviour as that of the beginning of the week in the analysed European electricity markets.Source: Prepared by AleaSoft using data from ENTSO-E, RTE, REN, REE, TERNA, National Grid and ELIA.
Mainland Spain, photovoltaic and solar thermal energy production and wind energy production
The Mainland Spain’s electricity demand fell by 2.8% from Monday to Wednesday of the week of July 13. The decrease in average temperatures by 1.0 °C is among the main causes of this decline. At AleaSoft it is expected that, at the end of the week of July 13, the demand will continue to be lower than that registered during the week of July 6.
The average solar energy production in Mainland Spain, which includes the photovoltaic and solar thermal technologies, decreased by 1.9% between July 13 and 15 compared to the average of the second week of July. In the year‑on‑year analysis, from the first day of July to Wednesday, July 15, an increase of 68% was registered. The AleaSoft forecasting indicates that at the end of the week number 29 the total solar energy production will be lower than that registered the week of July 6. According to the data published by Red Eléctrica de España, updated until June 2020, the peninsular installed photovoltaic capacity increased 780 MW so far this year compared to the total installed until December 2019.
The average level of the wind energy production in Mainland Spain during the first three days of the third week of July increased by 27% compared to the average of the previous week. In the year‑on‑year analysis, the wind energy production during the first half of July was 52% higher. For the week that started on Monday, July 13, the production with this technology is expected to be higher than that of the week of July 6. Regarding the installed wind capacity, from January to June 2020, new 445 MW were installed on the peninsula compared to the total installed until 2019, according to data published by Red Eléctrica de España.
At the moment, all nuclear power plants are underway and the nuclear energy production maintains a level close to 167 GWh per day.Sources: Prepared by AleaSoft using data from REE.
The hydroelectric reserves currently have 14 753 GWh stored, according to data from the last Hydrological Bulletin of the Ministry for the Ecological Transition and the Demographic Challenge, representing a decrease of 288 GWh compared to bulletin number 27.
European electricity markets
The first four days of the week of July 13 there were price increases in most of the analysed European electricity markets compared to those of the same days the previous week. The exception was the MIBEL market of Spain and Portugal, where there was a decrease of 5.5%. On the other hand, the highest price rise, of 63%, was that of the Nord Pool market of the Nordic countries. While the N2EX market of Great Britain, the EPEX SPOT market of France and the IPEX market of Italy had the smallest price increases, of 3.1%, 3.4% and 3.6% respectively. In the rest of the markets, the price increases were between 14% of the EPEX SPOT market of Belgium and 21% of the EPEX SPOT market of Germany.
In the analysed electricity markets, the average for the first four days of the third week of July was in general above €30/MWh. However, the Nord Pool market had an average price ten times lower than that of other markets, remaining at €3.74/MWh. The rest of the markets reached average prices between €33.38/MWh of the MIBEL market and €39.27/MWh of the EPEX SPOT market of Germany.
Regarding the daily prices of the analysed European electricity markets, on Wednesday, July 15, and Thursday, July 16, there were daily prices above €40/MWh in the IPEX and EPEX SPOT markets, with the exception of the prices of the 15th in the markets of France and the Netherlands, which remained at €39.94/MWh and €38.94/MWh respectively. The highest daily prices of these days, of €44.45/MWh and €43.64/MWh, were those of the markets of Germany and the Netherlands respectively, reached on Thursday, July 16.
On the other hand, on July 15, hourly prices above €50/MWh were reached in the German and Belgian markets. While on the 16th, the hourly prices exceeded €50/MWh in Germany, Belgium and France.Source: Prepared by AleaSoft using data from OMIE, EPEX SPOT, N2EX, IPEX and Nord Pool.
The price increases during the first days of the week of July 13 were favoured by the fall in wind energy production in many European countries and, in the case of France and Italy, also by the decrease in solar energy production. On the other hand, in the MIBEL market, the increase in wind energy production allowed the price drop.
The AleaSoft‘s price forecasting indicates that at the end of the week of July 13, the average price will continue the same trend registered during the first four days of the week in all European markets. For the week of July 20, the prices are expected to increase at the beginning of the week in most analysed markets, including the MIBEL market. The exceptions will be the markets of the Netherlands and Germany. In the latter, increases in wind and solar energy production are expected.
In the MIBEL market of Spain and Portugal, the average price of the first four days of the week of July 13 fell by 5.5% compared to that of the same period of the week of July 6. This behaviour contrasts with that of the rest of the European electricity markets analysed at Alesoft, where there were prices increases.
This decrease in prices allowed the average price from July 13 to 16, of €33.38/MWh in both cases, to be the second lowest in Europe, after that of the Nord Pool market. In this period, the daily prices were the same in both Spain and Portugal, remaining between €31.06/MWh of Wednesday, July 15, and €34.89/MWh of Thursday, July 16. While the hourly prices ranged from €25.10/MWh for hours 4 and 5 of July 13 to €39.93/MWh for hour 14 of July 16.
During the considered period, the increase in wind energy production in the Iberian Peninsula favoured the fall in prices in the MIBEL market, despite the slight decrease in solar energy production in Spain.
However, the AleaSoft‘s price forecasting indicates that the average price for the first four days of the week of July 20 will be higher than that of the period from July 13 to 16 in the MIBEL market, since lower wind and solar energy production is expected in the Iberian Peninsula for that period.
So far this week, since Monday, July 13, the electricity futures prices for the next quarter rose in most European markets. The exceptions to these increases were the EEX and ICE markets of Great Britain and the ICE and NASDAQ markets of the Nordic countries. The highest price increase was registered in the EEX market of Germany, with an increase of 1.8% compared to the session of Friday, July 10. Meanwhile, the ICE market of the Nordic countries registered the largest drop, of more than 10%.
The outlook for the futures prices for the product of next year 2021 is very similar to that of the quarterly product, with the difference that the increases in general were more pronounced and that in this case the exception to the price increase was only in the markets of the Nordic countries. The ICE market of the Netherlands was in this case the one with the highest increase, with a rise of 3.5%. The greatest drop was that registered by the NASDAQ market of the Nordic countries, of 9.2%.
Brent, fuels and CO2
The Brent oil futures for the month of September 2020 in the ICE market started the week of July 13 with prices lower than those of the same days of the second week of July. But as of Tuesday, the prices started to recover and on Wednesday, July 15, the settlement price was $43.79/bbl. This price is the highest since the first half of March.
The situation of uncertainty regarding the evolution of the COVID‑19 pandemic continues to threaten the recovery in demand. But, on July 15, the OPEC+ agreed to reduce its production cuts from August. However, the increase in production derived from the reduction in cuts will not be as high as it would be expected, since the countries that exceeded their production quota in the months of May and June committed to compensate for these excesses with greater cuts during the third quarter of the year.
On the other hand, the TTF gas futures prices in the ICE market for the month of August 2020, at the beginning of the week of July 13, continued the downward trend of the week of July 6, until reaching a settlement price of €5.08/MWh on Tuesday, July 14. This price is 17% lower than that of Tuesday, July 7, and the lowest since the beginning of June. But, on Wednesday, July 15, the prices recovered by 2.8% to a settlement price of €5.23/MWh.
Regarding the TTF gas prices in the spot market, the first days of the week of July 13, were below €5/MWh. The maximum index price so far this week was that of Tuesday, July 14, of €4.82/MWh. While the minimum, of €4.23/MWh, was reached on Wednesday, July 15, and it was the lowest since the beginning of June. But on Thursday, July 16, the index price increased by 9.5% to €4.64/MWh.
The registered increase in gas prices is related to the Wednesday’s decline in gas flow from Norway. Furthermore, the high CO2 emission rights prices favour the use of gas in the electricity generation over the use of coal. However, the levels of the gas reserves remain high, making it difficult to recover prices.
As for the API 2 coal futures in the ICE market for the month of August 2020, the first days of the third week of July remained below $50/t. The settlement price of Monday, July 13, of $48.80/t, was 0.2% lower than that of the session of Friday, July 10, and 7.0% lower than that of Monday, July 6. But on Tuesday and Wednesday the prices recovered slightly to $49.60/t of Wednesday, July 15. This upward trend was favoured by news about the plans to reduce the production in mining areas of Colombia.
Regarding the CO2 emission rights futures prices in the EEX market for the reference contract of December 2020, the first days of the week of July 13, increased until reaching a settlement price of €29.65/t on Tuesday, July 14. However, on Wednesday, July 15, they fell by 2.7% to register a settlement price of €28.85/t.Source: Prepared by AleaSoft using data from ICE and EEX.
AleaSoft analysis on the effects on the electricity markets due to the coronavirus crisis
On September 17, AleaSoft will hold the webinar “Energy markets in the recovery of the economic crisis”, in which the following topics will be addressed:
- Evolution of European energy markets in the economic recovery
- Financing of renewable energy projects
The most recent data published by REE shows that the installation of new capacity of electricity generation with renewable energies continued in the first half of 2020 despite the coronavirus crisis. According to the entity, in this period 1225 MW of solar photovoltaic and wind energy were installed. At AleaSoft, the long‑term prices forecasting were updated, which are useful for establishing a financing strategy for the renewable energy projects.
At the AleaSoft’s observatories, the evolution of the energy markets can be analysed with daily updated data. These observatories include information on the main European electricity, fuels and CO2 emission rights markets.
Source: AleaSoft Energy Forecasting.