The gas price rose slightly last week. Greater demand and fear of lower supply caused the increase. In addition, the electricity price increased slightly due to lower production of renewable energy.
The gas price has risen slightly this week. On Tuesday, February 27, gas traded for €24,48 per megawatt hour. Then the price rose slightly. On Monday, March 4, the price on the TTF rose to €25,85.
Although the gas price is again 12,7% higher than around the low point of €22,93 on February 23, the gas price is considerably lower compared to the last two years. Last year, the price of gas was still above €50 at this time of year, despite a mild winter and well-stocked reserves. In other words, the price of gas has roughly halved since then. Taken over a short period of time, high filling levels result. The initial reserves are currently 62,12% full. In Germany, reserves are still 69% full. Over a longer period there is also clearly more peace, as the effects of the gas crisis have not been too bad so far.
Supply and demand push prices up
Remarkably, the price increase is a direct response to the lower prices of recent weeks. Demand is increasing due to the low gas price. More gas is used, especially for generating electricity. To reduce CO2 emissions, Germany has switched in recent years from generating electricity from coal-fired power stations to gas-fired power stations. Due to the high gas prices last year, it has become more normal to use old coal-fired power stations again. However, the low gas price makes it more attractive to reduce the share of coal. Reuters reports that early last week it was even cheaper to generate electricity from gas than from coal. However, due to higher consumption, demand rises again.
In addition, the LNG supply is under pressure. The LNG supply from the large American export facility Freeport is still limited. This is causing a lot of fear in the gas market, as the United States exports about two-thirds of its LNG to the European Union. In addition, the low European gas price ensures that more American gas is traded on the Asian market. In January, 17% of American LNG was sold on the Asian market. In February the percentage rose to 25%.
Electricity prices remain quite stable
The electricity price was quite stable this week. On Thursday, February 29, electricity traded at the lowest price. On that day the price was €64,10 per megawatt hour. The price was the highest on Monday, March 4, at €75,91.
This caused the price to rise compared to last week. The higher electricity price is partly the result of the rising gas price, but the changed pattern from renewable sources is more dominant. Lower production of virtually free solar and wind energy has an impact on the market. Last week, 47,1% of electricity was generated from renewable sources. The week before, that percentage was 52,5%, a relatively small difference of 5,4 percentage points.
Perhaps more importantly, the ratio of the two renewable sources is changing. Last week, 34,6% of Dutch electricity was generated by wind turbines. That is considerably lower than the 45,6% of the week before. However, this was compensated by a greater number of hours of sunshine. The share of solar energy increased from 6,9% to 12,5%. This is a more or less usual change for the time of year. In the spring, the number of hours of sunshine increases and the wind force decreases. As a result, production from renewable sources becomes less stable. While strong winds are often relatively stable, solar energy causes significant peaks during the day.
Exports are increasing again
The result is that electricity prices are expensive in the evening, but drop sharply in the afternoon. Often the prices are even negative. Despite a high number of hours of sunshine, steam prices remained reasonably stable. For example, on Saturday March 2, solar panels met more than the total Dutch electricity demand. Due to large-scale exports, the daily price remained well above €0 and even gas and coal-fired power stations were used.