Analysis Electricity
Electricity price falls for third week in a row
The price of electricity is falling for the third week in a row, but at first sight there are not many windfalls. Because the wind was down this week, the yields of green energy are disappointing and the prices of fossil raw materials also show a mixed picture. The gas price is falling and this appears to be sufficient to keep peak electricity prices below €300.
The decline in the price of electricity in recent weeks continues. Last week, the electricity price still peaked above €300 per megawatt hour. This week, the price leveled off and the APEX spot's highest quote was €254,63. Just two days later, the electricity price was over €200. The price of electricity fell towards the weekend. The price was lowest on Sunday, October 16, at a stand of €106,09. At the time of writing this article (October 18), a megawatt hour of electricity costs €166,12. The low electricity price is now having an effect on suppliers' rates. This morning, Eneco announced that it would lower its electricity rates.
In contrast to previous weeks, the low electricity price is not the result of large yields from green electricity. In fact, the production of green energy declined considerably. Less electricity was generated in particular from wind energy and relatively large yields from solar energy were unable to compensate for this shortfall.
The prices of coal and oil do not depress the electricity price either. According to analysts, international coal prices are simply high. The coal price is currently growing in line with the historically high gas prices. Before the invasion of Ukraine, the price of the leading Newcastle Coal Futures was still between $150 and $200 per tonne, but the price for coal now fluctuates structurally around $400.
Although the oil price fell last week, this gives a distorted picture of the long-term price development. The fall in the oil price follows a large price increase as a result of a recent intervention by OPEC+. Two weeks ago, the oil cartel decided to cut its production by 2 million barrels per day. Although the oil price is not yet close to the $110 that some analysts predicted, the oil price is almost $10 higher than before the intervention.
Low gas price
The price of one fuel did find its way down, namely that of natural gas. At the time of writing, the TTF is at €132,15, the lowest price since the beginning of June. Well-filled gas reserves in particular provide peace of mind in the previously volatile gas market. Windfalls on the gas market seem to be pushing the price of electricity single-handedly.
It is not surprising that the gas price has such a strong influence on the price of electricity. Even now that the coal-fired power stations are running at full speed again, gas in the Netherlands remains the most commonly used source for generating electricity. Certainly in a week like this in which the revenues from renewable sources are disappointing, a lot of gas is burned. Last week, for example, more than half of the Dutch electricity was generated by gas-fired power stations.
Matthew Bremer
© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.
