The escalation of the war in the Middle East has seen gas prices reach a 10-month high this week. Meanwhile, electricity prices remain stable and relatively affordable despite relatively low renewable generation.
The gas price has fallen slightly after the increase at the beginning of this month. On Tuesday 1 October the TTF was at €39,27. Until Friday 4 October the gas price was on the rise. That day gas was traded for €40,98 per megawatt hour. On Monday 7 October the price fell to €39,63.
At almost €41 per megawatt hour, the gas price reached its highest level in no less than ten months. The increase is the result of the further escalation of the conflict in the Middle East. Last week, Iran launched a missile attack on Israel. Since then, we have been waiting for a response. Initially, the message from US President Joe Biden that the United States does not support an attack on nuclear infrastructure provided calm. However, on Friday, consultations with the United States about attacks on oil infrastructure resulted in higher gas prices. Escalation of the conflict could have consequences for LNG supplies from Qatar. Liquid gas from that country is shipped through the Red Sea, which is located next to Israel.
Meanwhile, the leading Asian LNG price gives little reason for a lower TTF. The price is currently quite stable, interrupting the decline of the last few weeks. On Tuesday, October 1, LNG was trading for €13,13 per MMBtu. On Friday, October 4, the price was only 4 cents lower, at €13,09.
Sharp decline
The fact that the price took a step down on Monday is partly due to more favorable temperatures. In addition, the expectation of more wind in Europe is causing lower gas prices. Due to a higher efficiency of wind turbines, the market has adjusted its expectations for the consumption of gas-fired power stations downwards. In addition, the full European gas reserves continue to cause some price pressure. The European reserves are currently filled for 94,4%.
Electricity price stable
The electricity price remained more stable than usual this week. On Tuesday 1 October, electricity was paid for €67,40 per megawatt hour. On Friday 4 October, the electricity price reached its highest price. On that day, gas was traded for €95,81 per megawatt hour. On Sunday 6 October, the price dropped to its lowest point of the week. The electricity price decreased that day to €54,52.
This week, renewable energy proved to be the most dominant factor on the electricity market again. The yields from solar and wind energy were on the low side this week. In total, 46,1% was generated by the two virtually free sources. 19,8% of the electricity was generated by solar collectors. The total yields from wind energy amounted to 26,3%. Since spring, a share of at least 50% from these sources has been common.
However, electricity prices were not too high this week. This is due to a relatively large share of wind energy. Now that autumn is really getting going, less solar energy and more wind energy is being generated. This ensures that prices are more consistently depressed, since the wind usually remains fairly stable, while solar energy has clear peaks in the middle of the day.
Wind proves to be decisive
There was a fair amount of wind energy for most of the week, which put a considerable dent in the base price. However, on Tuesday 1 October the price turned out to be on the high side due to a limited number of hours of sunshine. Around noon the price only dropped to a level of around €60. On the other days of the week the price dropped to a level of a few euros in this part of the day. On Friday 4 October the price rose sharply throughout the day, as there was virtually no wind. Because the sun was shining the price was low around noon, but the rest of the day the price was hardly depressed.