The prices dropped in southern Europe markets due to greater waind energy production and lower demand

AleaSoft, February 27, 2020. The prices of the markets of southern Europe, Spain, Portugal and Italy, fell so far this week compared to the same period of last week due to the increase in wind energy production and a lower demand. In the case of Spain, the increase in solar energy production also favoured this decrease. In the rest of the markets the prices rose. On the other hand, the Brent oil prices continued to fall due to the negative effects on the economy that the expansion of the coronavirus may cause.

Photovoltaic and solar thermal energy production, wind energy production and electricity demand

So far this week, the solar energy production declined in several of the European markets compared to last week’s average. The largest decrease was registered in the French market, of 12%. The decrease in Germany was 8.3%, in Portugal 4.1%, and in Italy 5.7%. On the other hand, in the Spanish market, the production increased by 13%.

Analysing in year‑on‑year terms the first 26 days of February, Germany and France maintained a lower solar energy generation compared to that of 2019, with decreases of 24% and 6.7%. On the other hand, in Portugal it increased by 20% and in the Iberian Peninsula by 27%. The increase of Italy was the lowest, reaching only 4.5%.

It is expected that by the end of this week the solar energy production of the German market will recover and conclude with a total higher than that of last week. For the Italian market, the analysis carried out at AleaSoft indicates that it will end this week with values lower than those of the week of February 17.

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.

This week, the wind energy production increased in most European markets from Monday to Wednesday compared to last week’s average, mainly in the markets of southern Europe where the increases were between 72% and 78%. In the French market the rise was 16%, while in Germany the production decreased 24%.

In the elapsed days of February, the wind energy generation of the markets of Germany and France registered significant increases in year‑on‑year terms, which were 85% and 116% respectively. However, in the rest of the markets it decreased, with Portugal being the one with the largest variation, of ‑23%, while in Italy it was ‑2.4%.

At AleaSoft, the wind energy production of the European markets is expected to increase in most markets at the end of this week, becoming higher than that of last week, except in Germany.

The influence of the average temperatures from 24 to 26 of this week, less cold than last week, caused the fall in electricity demand in several of Europe’s markets compared to the same period of the week of February 17. Such is the case of the French market where the demand fell 1.3% and the Italian market where it fell 2.3%. In the case of Portugal, there was a decrease of 11% whose main cause was the holiday of Carnival Tuesday, celebrated on February 25. In Germany there was a decrease of 4.4%. On the other hand, in Great Britain, Belgium and the Netherlands, the temperatures were colder than the average of the first three days of the previous week, and increases of 3.2%, 1.2% and 2.7% respectively were registered.

For the end of this week, the electricity demand is expected to maintain the same trend of the elapsed days of this week compared to the previous week in most European electricity markets.

Mainland Spain, renewable energy production

The renewable energies increased overall in Spain so far this week compared to the average of the week of February 17. The solar energy production of Spain, which includes photovoltaic and solar thermal energy, increased by 13% and the wind energy production by 73%.

From February 1 to 26, the solar energy production also increased by 28% in year‑on‑year terms. However, the wind energy production decreased by 0.9% in year‑on‑year terms during this period.

It is expected that both solar and wind energy production of Mainland Spain will end this week with values higher than those of last week.

The average temperatures increased 0.9 °C during the elapsed days of this week compared to the same period of the third week of February, causing a 1.8% decrease in electricity demand. At AleaSoft it is expected that at the end of the week, the total electricity demand will be lower than that of the previous week.

The nuclear energy production remains stable compared to last week. Currently, all nuclear power plants are underway.

The level of the hydroelectric reserves decreased as in the last report, decreasing this time by 10% and now stands at 12 975 GWh, according to data from the latest Hydrological Bulletin of the Ministry for Ecological Transition and Demographic Challenge.

European electricity markets

During the first four days of this week, the prices of the MIBEL market of Spain and Portugal and the IPEX market of Italy fell compared to the same period of last week. The decreases were 14%, 13% and 4.1% respectively. A greater wind energy production and a lower electricity demand in the elapsed days of this week with respect to the same days of the week of February 17 allowed the drop in prices of these markets. On the other hand, the prices rose in the rest of the markets, with increases from 23% of the EPEX SPOT market of Germany to 7.6% of the EPEX SPOT market of France.

On Wednesday, February 26, the prices in the EPEX SPOT market of Germany, France, Belgium and the Netherlands were quite coupled. The maximum difference was €0.67/MWh, between the French and German markets, which were the most dispersed. In the days before and after this, the prices in these markets were quite decoupled with maximum differences between €3.85/MWh and €6.01/MWh per day.

The N2EX market of Great Britain was at the top of the markets with the highest price in Europe in three of the four elapsed days of this week, being replaced by the Italian market on February 25, which was higher than the British only in €0.18/MWh. On the other hand, the Nord Pool market of the Nordic countries during this week continued to be the market with the lowest prices with a difference of around €20/MWh compared to the rest of the markets. During this week the prices of this market showed an upward trend, with increases per day ranging from €0.91/MWh to €4.40/MWh.

For the next few days, the market prices are expected to fall below current levels, due to the lower demand of the weekend. Once the week is over, the weekly average prices will continue the same behaviour they were registering, being higher than those of the week of February 17 in most European markets except those in southern Europe.

Iberian market

From Monday, February 24, to Thursday, February 27, the MIBEL market prices fell €11/MWh, as a result of the daily increase in wind energy production since the beginning of the week. With respect to the equivalent days of the week of February 17, the average price fell about €6/MWh so far this week. At the end of this week, the prices are expected to continue to be lower than those of last week, since the decreases of the first days of the week are added to those expected for the end of the week, as a result of lower demand during the weekend and the high wind energy production forecasted for this period.

Electricity futures

The electricity futures prices for the second quarter of 2020, settled this Wednesday, February 26, below the previous Friday in most European markets analysed by AleaSoft. The exception was the futures of the Nordic countries, both in the ICE market and in the NASDAQ market, in which prices rose by about 31% compared to last Friday. In the rest of the analysed markets, the prices fell between 3.1% and 8%.

As for the product of the year 2021, the behaviour was similar. While in the Nordic region there was a rise in prices close to 4.5% in its two markets, the rest of the analysed markets settled with negative variations ranging from ‑2.6% to ‑3.5%.

At the end of this Wednesday, the fact that the futures of the Nordic countries continue to be the lowest among all the markets analysed by AleaSoft stands out. Compared with the futures of the markets of Spain for the third quarter of 2020, the futures of the Nordic countries settled on Wednesday, February 26, about 60% lower than those of Spain.

Brent, fuels and CO₂

The Brent oil futures prices for the month of April 2020 in the ICE market, the first days of this week, continued with the downward trend started at the end of last week. As a result, on Wednesday, February 26, they reached a settlement price of $53.43/bbl, which is 9.6% lower than the one registered the previous Wednesday.

The expansion of the coronavirus and the concerns about its effects on the global economy led to this behaviour. These concerns may continue to affect oil prices in the coming days. But, at the beginning of March, the OPEC+ is scheduled to meet to decide on possible new production cuts, which will also exert its influence on price evolution.

In the case of the TTF gas futures in the ICE market for the month of March 2020, the first days of this week, the settlement prices remained around €9.04/MWh, after falling on Monday by 3.9% compared to the settlement price of the previous Friday.

The TTF gas prices in the spot market on Tuesday, February 25, registered a decrease of 2.8% compared to Monday, reaching an index price of €9.25/MWh. Subsequently, the prices were stabilised again and the price for this Thursday, February 27, was €9.21/MWh.

Regarding the API 2 coal futures prices in the ICE market for the month of March 2020, they started this week continuing with the downward trend of last week. As a result, a settlement price of $47.15/t was registered on Tuesday, February 25, which is the lowest in the last two years. On Wednesday, February 26, the prices recovered slightly until reaching a settlement price of $47.50/t, the highest so far this week.

As for the CO₂ emission rights futures in the EEX market for the reference contract of December 2020, they started the week of Monday, February 24, with a settlement price of €24.57/t, a 4.1% lower than that of last Friday. Until Wednesday, February 26, this week’s settlement prices remained below €25/t, unlike last week.

Source: AleaSoft Energy Forecasting