AleaSoft Energy Forecasting, December 12, 2024. Since the end of November, the Spanish electricity market has registered the highest prices of the year, driven by factors such as low nuclear and wind energy generation, increased demand due to lower temperatures and higher gas prices. In this context, PPA contracts are consolidating as a key tool to protect large consumers and developers against market price fluctuations.
Evolution of Spanish electricity market prices since the end of November
Since November 26, the MIBEL electricity market of Spain has registered the highest prices of the year 2024. Analysing the price series up to December 13, the highest value of the year, €146.67/MWh, was reached on December 12, followed by €143.73/MWh registered one day later, on December 13. During this period, daily prices exceeded €120/MWh, except between December 6 and 9, when they fell due to lower electricity demand associated with the national and regional holidays of December 6 and 9, as well as the weekend. This decline also coincided with higher wind energy production on these days.
Source: Prepared by AleaSoft Energy Forecasting using data from OMIE. Available at Alea Energy Data Base.
Source: Prepared by AleaSoft Energy Forecasting using data from OMIE.
The price captured by solar photovoltaic energy and wind energy in the period from November 26 to December 11 was €100.58/MWh and €97.76/MWh, respectively, representing a price factor of 87% and 84% in each case.
The increase in market prices has been driven by several factors. Firstly, the shutdown of the two reactors of the Ascó nuclear power plant has reduced the available nuclear energy. Secondly, on some days of the analysed period, wind energy generation was low, below 100 GWh per day. Added to this is an increase in electricity demand due to the drop in temperatures during a cold winter across Europe, which, in addition to causing an increase in electricity demand, is also causing an increase in gas demand that raises gas prices and in turn feeds back into upward pressure on electricity market prices. TTF gas prices in this period have been the highest of the year, exceeding €44/MWh.
What is the situation in the rest of the main European electricity markets?
In the main European electricity markets the situation has been similar, with the highest prices of 2024 being registered as of November 26. In particular, between December 11 and 13, most of these markets reached what, so far, are their first, second, and in some cases third highest prices of the year. The evolution of the energy markets in recent days can be analysed at AleaSoft’s Energy Markets Observatories.
The highest daily price in the main European markets between November 26 and December 13 was registered in the EPEX SPOT market of Germany on December 12, with a value of €395.34/MWh. However, this is the second highest price of the year in that market, being surpassed by the €492.03/MWh reached on June 26. Also on December 12, the EPEX SPOT market of the Netherlands surpassed the €300/MWh daily average, with a price of €355.58/MWh, the highest price registered in that market so far this year.
Source: Prepared by AleaSoft Energy Forecasting using data from OMIE, EPEX SPOT and GME. Available at Alea Energy Data Base.
Prospects for the coming weeks in the Spanish electricity market
AleaSoft Energy Forecasting expects that, with the increase in demand during the winter, prices in the Spanish electricity market will remain at similar levels to those of the last few days, provided that gas prices remain high, as expected. The evolution of wind energy production will be a key factor in determining whether prices are more or less high.
In addition, the Ascó nuclear power plant is expected to be operational again in mid‑December, which could contribute to a moderation in prices. During the Christmas period, prices are likely to fall due to reduced labour activity and lower electricity demand associated with the holidays.
The importance of PPA in mitigating market price risk
Rising prices have created difficulties for large and electro‑intensive consumers that are directly exposed to spot market prices. This situation underscores the importance of PPA (Power Purchase Agreements) and hedging as strategies to manage the risk associated with periods of high prices.
During the past spring, characterised by low market prices, AleaSoft’s Marketplace of PPA saw a slowdown in the market for these power purchase agreements. This was because expectations of low captured prices for photovoltaic energy in the coming years led buyers to ask for lower prices that did not meet the predictable revenue needs of developers.
However, the electricity market is characterised by cycles of high and low prices. This behaviour highlights the relevance of PPA for both parties. Buyers protect themselves from price increases, while sellers secure stable revenues, mitigating the inherent volatility of the market.
AleaSoft Energy Forecasting’s Marketplace of PPA
AleaSoft Energy Forecasting’s AleaHub division offers, among its services, a Marketplace designed to facilitate the buying and selling of PPA contracts. In this environment, AleaSoft acts as a market integrator helping buyers and sellers of renewable energy to find a counterparty for their needs, taking into account factors such as the amount of energy, the term of the contract, the PPA type, the price, the inclusion of Guarantees of Origin (GO), among others.
With more than 25 years of experience in the energy sector in Spain and Europe, AleaSoft is in contact with large and medium-sized players in the sector, which reinforces its ability to effectively connect stakeholders and promote profitable agreements for all.
Source: AleaSoft Energy Forecasting.
