European prices for gas and electricity are currently on the rise. While disruptions in the gas market push prices up, the production of renewable electricity puts less pressure on electricity prices.
The gas price has taken a significant step up this week. On Tuesday, March 12, gas traded for €24,78 per megawatt hour. Since then, the quotation on the TTF rose to €28,42 on Monday, March 18.
The main reason for the increase is the disruption of the Norwegian gas network. For example, the supply fell by 10 million cubic meters due to a power outage affecting several fields that supply gas to Europe via the FLAGS pipeline. In addition, the St. Fergus gas facility was out of service last week, resulting in 10 to 15 million cubic meters less gas supplied, and a disruption at the Aasta Hansteen field caused a decrease of 7,5 million cubic meters.
In addition, the LNG supply from the United States is still disrupted. Technical problems with the upload facility have still not been resolved. In total, LNG exports will decrease by about 566.000 cubic meters. As a rule, 67% of this would end up on the European market. In addition, LNG demand is growing on the Asian market. This is especially noticeable on the futures markets. The spot price remained the same this week, at $8,60 per mmBtu. In contrast, the May contract rose to $9 per mmBtu. The market clearly expects more competition for Europe in the short term.
High filling level, low consumption
It is remarkable that the high filling level and low consumption reduce the gas price. European gas reserves are currently more than 60% full. In addition, consumption is currently considerably lower than before the war in Ukraine. In total, gas demand for heating last week was 620 million cubic meters. Between 2017 and 2021, consumption averaged around 900 million cubic meters. This has reduced consumption by approximately 31%. Until two weeks ago, these factors ensured that the gas price barely moved, but now that Asian demand is increasing and supply in our export markets remains under pressure for longer than expected, an increase is following.
Electricity price increases
The price of electricity developed roughly the same as last week, although the development deviated on two points. Firstly, the trough was shallower and secondly, the market low was on Friday and not on Sunday. The EPEX reached its highest point of the week on Monday, March 18 at €77,61. The electricity price reached its lowest level on Friday, March 15. The price dropped to €52,94 on that day.
The production of renewable energy again proved to be decisive for the course. At the beginning of the week, renewable energy production was on the low side. The number of hours of sunshine in particular was disappointing. From Wednesday, the supply of wind in particular increased and from Thursday solar energy took over. Over the weekend, wind energy production in particular fell, but the sun continued to shine brightly. This created a considerable difference between production peaks and troughs and the price rose.
This translated into a significant difference in the supply of renewable energy. On average, 55% of all energy in the Netherlands was generated from renewable sources last week. On Monday, March 11, this percentage remained at 29% in comparison. This percentage of renewable energy also includes biomass. The total percentage of solar and wind energy is 45,6%, of which 31,8% was generated by wind turbines and 13,8% by solar panels.
That is a fairly large share of virtually free energy. The fact that the price remained somewhat higher despite the large supply is due to the strong exports during top production. As a result, negative prices did not occur at peak times.