The gas price has risen again this week to over €40 per megawatt hour due to the unrest in the Middle East. This was also noticeable on the electricity market. The price on the electricity market is now considerably less stable due to the increase.
The price of gas has taken a small step up compared to last week. On Tuesday 8 October, gas was traded for €38,92 per megawatt hour. On Monday 14 October, the price rose again to €40,15.
In the gas market, the main focus is still on the geopolitical tensions in the Middle East. In particular, the situation in the Red Sea, which is close to Israel, is being monitored. LNG ships from Qatar have to sail through this sea to reach Europe. Last year, sailing through the Red Sea was already quite risky. Houthi rebels randomly attacked cargo ships in protest against Israel's actions against Gaza.
Since Israel's actions against Lebanon, Houthi rebels have again increased their missile attacks on ships in the area. If the situation in the Red Sea were to deteriorate significantly, ships would have to divert via the Cape of Good Hope. This would take an additional ten to fifteen days, which would mean that Europe would have to pay a considerable additional price for Qatari LNG. Incidentally, this is not the only risk for Qatari gas. Low water levels in the Suez Canal also hamper the supply of Europe. As a result, the maximum number of ships allowed to sail through the canal could be adjusted downwards.
LNG price remains stable
Meanwhile, the Asian price for LNG remains fairly stable. On Tuesday, October 8, LNG was traded in Asia for $13,10 per MMBtu. On Friday, October 11, the price dropped by 2 cents to $13,08. This summer, the Asian LNG price rose sharply, because the demand for gas to generate electricity increased sharply. Several heat waves caused the demand for electricity for air conditioners to increase significantly. It is no longer nearly as cold, but the Asian market is starting to look towards winter. Whether the price will drop in the coming months will again depend mainly on the temperature. If it gets really cold, it cannot be ruled out that the current price level will hold for a while. Especially if it gets colder than normal in Europe at the same time, there could be fierce competition between the continents.
Electricity quite dynamic
The electricity price was quite dynamic this week. On Monday 14 October, the electricity price reached its highest price in two months, at a level of €117,05 per megawatt hour. The day before, the price of electricity was the lowest in over a month. That day, the electricity price was only €32,94.
An important factor for the increased volatility in the electricity market is the higher gas price. Due to the higher gas price, the price of electricity is almost constantly being pulled up. Gas remains one of the most used sources for generating electricity. Roughly a third of all electricity in the Netherlands is generated from gas.
The effect of the high gas price is particularly noticeable when little electricity is generated from renewable sources. At times when a lot of gas is needed to meet the electricity demand, we now see the gas price registering higher and stronger peaks. Due to the significant drop in the gas market, there were no more peaks above €100 after the beginning of January. Since August, the gas price has risen above that level several times.
That was exactly the story of this week. The share of solar and wind energy was clearly below half this week. Only 47,4% of all electricity was generated from the two sources and was almost free. In total, 17,4% of all electricity was generated by solar collectors. The percentage of wind energy was 29,9%. In the summer, more than half of all energy was usually generated from renewable sources, and sometimes as much as 60% was generated from the two renewable sources.