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Analysis Energy

Gas price rises again after weeks of decline

1 October 2024 - Matthijs Bremer

After last week's decline, the price of gas has risen sharply this week. Higher temperatures in Northern Europe are causing a sharp increase. Meanwhile, increased wind energy production has led to favourable electricity prices.

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The price of gas has increased. On Tuesday 24 September, the gas price was at its lowest level of the week. That day, gas was traded for €36,19 per megawatt hour. The price increased until Monday 30 September. That day, the TTF reached the level of €38,97.

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The main reason for the higher prices is a sharp drop in temperatures in Northern Europe. It will become considerably colder in the coming weeks. It can get very cold, especially at night. Night temperatures will sometimes drop below 10 degrees in the coming weeks. It is expected that heating will be turned on here and there in the Netherlands, Scandinavia and Germany. In addition, gas-fired power stations work less efficiently, especially at night.

In addition, the slow decline in the LNG price has stopped for the time being. Since the low of €12,83 per Mmbtu on September 19, the leading Asian LNG benchmark has risen slightly again. On Friday, September 27, liquefied gas was traded for €13,21. This while the summer is over and the Asian demand for LNG from air conditioners has decreased. The higher LNG price pulls the TTF up somewhat. In addition, analysts indicate that the filling of the gas reserves is somewhat stagnating, because ships are sailing to Asia. The effects of this are limited, however, since the European gas reserves are filled for no less than 94%.

Impact of completed work limited
Due to the lower temperatures and high LNG prices, the repair of the pipeline between the Netherlands and the United Kingdom barely managed to put pressure on European gas prices. From September 19 to Sunday September 29, the pipeline was under maintenance. Normally, the availability of the pipeline would put some pressure on prices.

Electricity price low
The electricity price was on the low side this week. On Wednesday 25 September, the gas price was at its highest point of the week. That day, gas was traded for €96,17 per megawatt hour. After that, the electricity price dropped considerably. On Friday 27 September, the price of electricity dropped to €20,01. In addition, the electricity price did not exceed €25 after 69 September.

Generation from renewable sources increased slightly this week. Total generation from renewable sources amounted to 56,5%. Last week, that percentage was 52%. That may be a relatively small difference, but due to a change in the distribution of the types of energy, the price was actually further depressed. Now that we are entering the winter pattern again, the percentage of solar power is decreasing and the amount of wind energy is increasing. Where last week 28,5% was generated by solar collectors, this week the percentage dropped to 18,7%. In the meantime, the percentage of wind energy increased from 23,5% to 31%. Because wind is generally more constant than solar energy, the price of electricity is constantly depressed. This has the effect of a relatively low price.

More than 50% renewable
A recent analysis by Statistics Netherlands (CBS) shows that in the first half of 2023, for the first time in six months, more than half of all electricity was generated from renewable sources. In total, 53% of total electricity, or 32,3 billion kWh in absolute terms, was generated from renewable sources.

This is the result of a significant increase in generation from renewable sources. In total, wind energy capacity increased by 4,4 billion kilowatt hours to 17,4 billion kilowatt hours. Two-thirds of this consisted of offshore wind turbines. Meanwhile, solar panel capacity increased by 0,8 billion kilowatt hours to 11,7 billion kilowatt hours. This figure is somewhat flattering, as the amount of sun this year was lower than in previous years.

The higher yields are mainly at the expense of coal power. The total capacity of coal-fired power stations fell by just under 40% to 3,9 billion kilowatt hours. Production from biomass fell by 16% in the meantime. The larger share from renewable sources is causing an increase in trade. In total, electricity imports rose by 4%. Exports rose even more, by no less than 10%.

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