For the first time since November 11, gas prices fell below $100 this week. The warm weather in particular is depressing the gas price, but European politics are also causing a lower price for the TTF this week. After weeks of rearguard action, the member states have agreed on a European price ceiling.
The gas price fell sharply this week. On Wednesday, December 14, the TTF rate was still €131,51 per megawatt hour. On Thursday, December 15, the gas price reached the highest price of the week, at €134,77. Then the price on the TTF plummeted. The gas price fell by 27,3% and reached below €21 per megawatt hour for the first time in a month and a half on Wednesday, December 100. At the time of writing (Wednesday, December 21), the price of 1 megawatt hour of gas was €98,00.
The fact that the gas price lost more than a quarter of its value is mainly due to warmer weather. After a cold period, the mercury starts to rise again. With temperatures of around ten degrees, it will be atypically warm in the coming weeks. In addition to this mild weather, less gas was used to generate energy this week than in the first month of December. A lot of wind energy was generated in various European countries, including the Netherlands and Germany, in the past seven days.
In addition, the French nuclear power stations are slowly but surely being restarted. Due to overdue maintenance, 25 of the 56 French nuclear reactors were shut down from late November to mid-December. Normally these reactors provide 70% of France's electricity demand. Because the power stations were missing almost half of their power, France had to purchase a lot of extra power from gas power stations in the rest of Europe at the beginning of December.
The majority of nuclear power stations are now back in use. Although it will take some time before all French reactors can supply power. The restart of two reactors at the Penley 2 nuclear power plant was postponed this week. The reactors should return to the grid in January 2023. However, due to disappointing work, the restart will be postponed until June 11, 2023.
Price ceiling
In addition, Brussels provided the gas market with clarity this week about the much-discussed price ceiling for the gas market. After weeks of negotiations, the European member states have agreed on the conditions for such a ceiling.
Since the end of November, prices of €275 and €220 per megawatt hour have been put on the table. Proponents of the price ceiling thought this limit was too high, because the ceiling would come into effect at the same time as these maximums. Countries such as Spain, Italy and Poland made a counter-proposal for a threshold value of €160 per megawatt hour. Because opponents are afraid that suppliers will ignore the EU if gas prices are high, countries such as the Netherlands and Germany are pushing for the highest possible maximum price.
On Monday, December 19, the two camps finally reached a compromise. The European maximum price for gas is set at €180 per megawatt hour. In exchange for this lower threshold value, proponents accept some additional conditions. For example, the price ceiling only comes into effect if the maximum price is exceeded for three days. In addition, in this new proposal, the price of LNG must be €35 higher than a benchmark yet to be determined for at least three days. Last week, the proponents of the price ceiling found these additional conditions unacceptable.