AleaSoft, July 9, 2020. The second week of July began with negative hourly prices in a large part of the European electricity markets due to the high wind energy production. Over the course of the week, the production with this technology decreased, favouring that in some hours the prices exceed €50/MWh, also driven by increased demand. The Brent oil futures continue to recover and the CO2 futures exceeded €29/t, values that were not registered since early August 2019.
Photovoltaic and solar thermal energy production and wind energy production
The solar energy production increased by 30% in the French market and by 3.6% in the Italian market between July 6 and 8 compared to the average for the week of June 29. On the contrary, in the Iberian Peninsula and Germany there were decreases of 9.2% and 1.7% respectively.
During the eight days elapsed in July, the solar energy production was higher than that of the same days of last year in most of the European markets analysed at AleaSoft. The greatest increase during this period was registered in the Iberian Peninsula, of 77%. In the Italian market, the production increased by 11% and in the French market by 3.8%. The exception was the German market, where the production was 2.8% lower.
The analysis carried out at AleaSoft indicates that the production in the Italian market will increase throughout the week. On the contrary, a reduction is expected in the markets of Spain and Germany.
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.
Between Monday and Wednesday of the second week of July, the wind energy production increased in the Italian market and in the Iberian Peninsula compared to the average of the previous week. In the Italian market it increased by 30% and in the Iberian Peninsula by 28%. On the contrary, in the French market the production with this technology decreased by 32% while in Germany it was 7.8% lower.
From July 1 to 8, the wind energy production increased by 94% in the Italian market and by 84% in the French market compared to the same period of July 2019. In the Iberian Peninsula and in the German market the increases were 36% and 11% respectively.
For the week total, the AleaSoft’s analysis indicates that the wind energy production will be lower in the main European markets except in the Spanish.Source: Prepared by AleaSoft using data from ENTSO-E, RTE, REN, REE and TERNA.
The electricity demand increased in all the analysed European markets, except in Italy, from July 6 to 8 compared to the same days of the week of June 29. The drop in Italy was 0.9% mainly due to temperatures that were 1.5 °C less warm. The most remarkable increases are those of Portugal and Great Britain, of 7.6% and 4.5% respectively. In the Netherlands and France the increases were 2.3% and 2.1% respectively, while in Germany and Belgium there was an increase of 1.6% in both cases.
The changes in demand behaviour can be analysed at the AleaSoft’s electricity markets observatories, with daily updated data.
For the week of July 6, the AleaSoft’s forecasting indicates that there will be increases in demand in most European 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
From July 6 to 8, the electricity demand in Mainland Spain had a week‑on‑week rise of 3.4%. This rise was mainly influenced by the increase in temperatures of about 0.4 °C during this period. At AleaSoft, the total demand of the week of July 6 is expected to be higher than that of the week of June 29.
The solar energy production in Mainland Spain, which includes the photovoltaic and solar thermal technologies, during the period between Monday, July 6, and Wednesday, July 8, decreased by 9.3% compared to the average of the previous week. In the year‑on‑year analysis of the production with this technology, an increase of 79% was registered during the first eight days of July. According to the AleaSoft’s forecasting, the total production of the week will be lower than that registered during the week of June 29.
Regarding the wind energy production, during the first three days of the week it increased by 50% compared to the average of the 27th week of the year. In the year‑on‑year analysis, the wind energy production during this month of July until Wednesday the 8th was 31% higher. It is expected that at the end of the week, the production with this technology will end up being greater than that registered during the previous week.
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 15 041 GWh stored, according to data from the last Hydrological Bulletin of the Ministry for the Ecological Transition and the Demographic Challenge, which represents a decrease of 323 GWh compared to the previous bulletin.
European electricity markets
The first four days of the week of July 6 there were price increases in most of the analysed electricity markets compared to the same days of the week of June 29. However, in the MIBEL market of Spain and Portugal and in the IPEX market of Italy there were decreases of 3.8% and 7.0% respectively. On the other hand, the highest price increase, of 12%, was registered in the EPEX SPOT market of the Netherlands. While the smallest increase, of 4.2%, occurred in the Nord Pool market of the Nordic countries. In the rest of the markets, the price increases were between 5.3% of the EPEX SPOT market of France and 11% of the EPEX SPOT market of Germany and Belgium.
The average for the first four days of this week was above €30/MWh in almost all the analysed electricity markets. The exception was the Nord Pool market, which had the lowest average price of this period, of €2.29/MWh. The rest of the markets had average prices between €32.46/MWh of the EPEX SPOT market of Germany and €37.35/MWh of the IPEX market.
On the other hand, on July 8 and 9, the daily prices exceeded €40/MWh in the EPEX SPOT market of Germany, France, Belgium and the Netherlands and in the IPEX market, while in the MIBEL market and in the N2EX market of Great Britain nearly reach them. The highest daily price between July 6 and 9, of €42.42/MWh, was reached on Thursday, July 9, in Germany. However, the average of the first four days of the week in this market was the second lowest in Europe because the second lowest daily price of this period, of €14.28/MWh, also occurred in the German market, on Monday, July 6. In the first four days of this week, the daily price of the Nord Pool market of the same day, of €1.02/MWh, was the lowest.
As for the hourly prices, the first four days of this week there were great contrasts. The week started on Monday, July 6, with negative hourly prices in the markets of Belgium, Denmark, Finland, Great Britain, Ireland, the Netherlands, Sweden, Estonia, Latvia, Lithuania and three areas of Norway. In the case of the Baltic countries and Norway, negative prices were reached for the first time at least since 2013. On the other hand, during some hours of July 8 and 9, the hourly prices exceeded €50/MWh in the markets of Belgium, France, Germany, Great Britain and Italy.Source: Prepared by AleaSoft using data from OMIE, EPEX SPOT, N2EX, IPEX and Nord Pool.
The week of July 6 started with high levels of wind energy production that allowed the negative hourly prices of some European electricity markets to be reached on Monday. In the case of the Nordic countries, in addition, the high hydroelectric energy production due to the snowmelt also contributed to the low prices reached. But the progressive decline in wind energy production over the following days favoured the upward trend in the European electricity markets prices. Another factor that led to the increase in prices was the increase in electricity demand.
The AleaSoft’s price forecasting indicates that in the last days of this week the prices will fall in the European electricity markets due to the recovery of the wind energy production levels in some countries and the drop in demand over the weekend. But, the first days of the week of July 13, the prices are expected to rise in a general way. The greatest price increase is expected in Germany, where a strong decline in wind energy production is expected during the first days of the next week.
Unlike most European electricity markets, the average price of the first four days of the week of July 6 fell by 3.8% in the MIBEL market of Spain and Portugal compared to the same period of the week of June 29. This decrease in prices was favoured by the increase in wind energy production in the Iberian Peninsula earlier this week.
The average price from July 6 to 9 was €35.33/MWh in both Spain and Portugal. In this period, the daily prices were the same in both countries with 100% hourly convergence and showed an upward trend. On Monday, July 6, the daily price of the MIBEL market was lower than €30/MWh, specifically of €28.39/MWh. But, during this period, they grew to touch €40/MWh, with the price of Thursday, July 9, being €39.95/MWh, the highest in the Iberian market since the end of February.
In addition, hourly prices above €43/MWh were reached in some hours of Thursday, July 9, the highest of which was that of the hour 22, of €43.82/MWh. Hourly prices at this level were not reached since the first half of March.
The AleaSoft‘s price forecasting indicates for the next week of July 13 that the average price for the first four days will be higher than the average between July 6 and 9, as reductions are expected for both wind and solar energy production in the Spanish market.
During the elapsed days of the week of July 6, there was a general rise in the electricity futures prices for the fourth quarter of 2020 in the markets analysed at AleaSoft with respect to the settlement price of the session of July 3. The NASDAQ market of the Nordic countries registered the largest variation, of 5.4%. However, in terms of absolute figures, the EEX market of Italy was the one with the greatest difference, with an increase of €1.82/MWh. The EEX market of France continued to be the highest priced for this product.
Regarding the electricity futures for the next year 2021, a price rise occurred in most markets, with the exception of the ICE and NASDAQ markets of the Nordic countries, where there were falls of 0.9% and 0.6 % respectively. In the rest of the markets, the increases were between 1.7% of the EEX market of France and Spain and the OMIP market of Spain and Portugal, and 3.3% of the ICE market of Belgium.
Brent, fuels and CO2
The Brent oil futures prices for the month of September 2020 in the ICE market, the first days of the week of July 6 had values above $43/bbl. The maximum settlement price so far this week, of $43.29/bbl, was reached on Wednesday, July 8. This price was 3.0% higher than that of Wednesday, July 1, and is the highest since the first half of March.
Despite the increase in COVID‑19 cases and the fear that new confinement measures will reduce the demand, the OPEC+ production cuts favoured settlement prices above $42/bbl since the beginning of July. On the other hand, the downward effect on prices, due to the increase in United States crude oil reserves last week, was offset by a significant decrease in gasoline reserves.
In the coming days, the evolution of the COVID‑19 cases will continue to influence the demand and prices of the Brent oil futures. Although, in the event that the governments opt for more localised confinements in the areas where new COVID‑19 outbreaks emerge, the effects will be lower than in previous months, when the confinements were more widespread.
Regarding the TTF gas futures in the ICE market for the month of August 2020, they began the week of July 6 with an upward price trend. As in the week of June 29, on Monday and Tuesday the prices were above €6/MWh. On Tuesday, July 7, a settlement price of €6.12/MWh was reached. This was only 0.6% lower than that of Tuesday, June 30, when the monthly maximum settlement price of June was registered. But on Wednesday, July 8, the settlement price fell by 3.1%, staying at €5.94/MWh. In the session of Thursday, July 9, values below €6/MWh are also being registered.
Regarding the TTF gas prices in the spot market, the first days of the week of July 6, they were above €5/MWh. The prices showed an upward trend until Wednesday, July 8, when an index price of €5.62/MWh was reached. But for this Thursday, July 9, the index price fell by 2.8% to €5.47/MWh.
As for the API 2 coal futures in the ICE market for the month of August 2020, on Monday, July 6, they reached a settlement price of $52.50/t, 2.3% higher than that of Monday, June 29, and the highest since the end of March. But on Tuesday and Wednesday the prices fell and the settlement price of Wednesday, July 8, of $50.75/t, was already 0.3% lower than that of the first day of July.
On the other hand, the CO2 emission rights futures in the EEX market for the reference contract of December 2020, the first days of the week of July 6, registered settlement prices above €29/t. The highest price, of €29.69/t was reached on Monday, July 6. This was 12% higher than that of Monday, June 29, and the highest since the beginning of August 2019. But, subsequently, the prices fell to €29.32/t on Wednesday, July 8.Source: Prepared by AleaSoft using data from ICE and EEX.
AleaSoft analysis on the effects on the electricity markets due to the coronavirus crisis
At AleaSoft the webinar “Energy markets in the recovery of the economic crisis” is being organised for September 17. One of the topics to be discussed is the evolution of the European energy markets in the economic recovery. As we saw, the electricity markets prices began to recover, but the uncertainty continues with the new outbreaks that are taking place and the possibility that they will increase in the fall and winter when the school year begins in person, which is add to the pessimistic outlook for the economy. Precisely, at AleaSoft the long‑term prices curves were updated taking into account the recovery scenarios.
The recovery of the market prices is positive news for the financing of renewable energy projects, another topic to be addressed in the webinar. In the series of webinars that was organised at AleaSoft since the coronavirus crisis began, the speakers highlighted on several occasions that the financing of renewable energy projects remained active and the investor appetite continued to be present during this period. The Royal Decree‑Law 23/2020 approved by the Spanish Government and the auctions of solar capacity to be held in August in Portugal will undoubtedly be a new boost for the development of the renewable energy.
In order to periodically monitor the evolution of the energy markets, the observatories were enabled at AleaSoft, which include daily updated information on the main variables of the electricity, oil, gas and CO2 emission rights markets.
Source: AleaSoft Energy Forecasting.