Panic in the electricity market

How did the price of electricity spike so much at the beginning of this week? In a few days, instead of €30-€40 per megawatt hour (MWh), a multiple was paid.

The price is now back to the level of the last few weeks, about €40 per megawatt hour. Analysts agree that disappointing wind energy yields (due to a calm wind) played a role, in addition to additional demand for power due to the unprecedented September heat at the beginning of this week. There was also little buffer capacity of power plants. Major maintenance of French nuclear power plants limits the electricity supply on the energy market. But the enormous price peak also remains partly inexplicable.

More and more important
In any case, it is crystal clear that with the increasing supply of green energy from wind turbines and solar panels, the peaks and troughs can become greater. Because the other extreme was also regularly discussed this year. The hourly price of electricity was almost zero or even negative in no fewer than 100 days.

The supply of solar and wind energy is largely determined by the weather. That also explains part of the erratic price trend. Next week there will most likely be a clear division into a summery first part until early next week and a downright autumnal second part with rain and a lot of wind. However, the XNUMX day forecast does not assume an unstoppable depression train will start.

Grilling of the hurricane season
At a global level, the weather also influences the energy market. The course of the hurricane season in the Gulf of Mexico largely determines the supply of oil and especially liquefied natural gas. However, the strength and timing of these hurricanes cannot be predicted weeks in advance, as is increasingly the case with normal weather forecasts. It is obvious that the approaching winter season will increase the demand for oil and gas and thus also have an upward effect on the price of electricity. The daily gas price has been moving between €10-15 per cubic meter since the beginning of the summer.

Structural lower demand for oil
On the other hand, analysts assume that oil demand will never return to pre-coronavirus levels. Working from home, which has been forced to take off because of the corona crisis, will be structural, analysts expect. Even if the corona crisis is under control, many more people will continue to work from home than before.

This week the price of oil shows a slight upward trend. Agricultural diesel (excluding VAT and including member discount and quantity surcharge) still costs less than €0,90 per litre. That was the price level where the price of agricultural diesel remained for a long time this summer, after the unprecedented dip in the oil price this spring.

EU ambition supports CO2 rights trade
The trade in CO2 rights is becoming an increasingly important part of the energy market. Although this week after the announcement of new EU ambitions towards the world's first climate-neutral continent, this did not immediately become apparent in a higher price. It is evident that the European Union wants to accelerate its climate ambitions by trading in CO2 emission rights. The interim target of a 2% CO40 reduction by 2030 has been raised to 55%.

Sunroofs beat parks
Investors in solar energy in the Netherlands will have to focus on solar roofs instead of solar parks. The Dutch government announced this week that it would focus on the production of wind energy over sea and not on solar parks. The new SDE+ scheme for the subsidization of renewable energy awarded subsidies fivefold to solar roof projects, compared to solar parks. 

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