Record wind power levels trigger energy price fall across Europe

by ClickGreen staff. Published Wed 08 Jan 2014 11:53, Last updated: 2014-01-08
Energy prices fall across Europe as wind power rises
Energy prices fall across Europe as wind power rises

Electricity prices across Europe dropped last month as mild temperatures, strong winds and stormy weather produced wind power records in Germany, France and the UK, according to data released by Platts.

The Platts Continental Power Index (CONTI) fell 0.4% in December 2013 to €46.80 per Megawatt hour (/MWh) compared to the November 2013 rate of €47.00/MWh, when calmer winds and colder temperatures suppressed wind power and boosted electricity prices. Year-over-year the index was up 8.8%.

The price decline was more marked in Germany, where the average day-ahead baseload price in December fell 10% month over month to €35.71/MWh. On a daily basis, December was a month of extremes for Germany, with day-ahead base prices closing on December 10 and 11 at less than €60/MWh – the highest over-the-counter levels seen all year – only to fall to its lowest level December 24 to €0.50/MWh.

"Last month's European power prices demonstrate growing price volatility observed in the winter months due to the capricious nature of the wind," said Henry Edwardes-Evans, Platts associate editorial director of Power in Europe.

"When wind power generation drops, Europe's power system often falls back on expensive natural gas-fired generators, and prices rally. When the wind blows, prices can actually turn negative as wind operators continue to feed subsidized power into the grid, despite the market signal."

"The overall effect has been volatile but generally lower wholesale power prices," Edwardes-Evans said. "The average CONTI Index price for 2013 was €43.34/MWh, down 13% from 2012's €50.00/MWh."

In the UK, day-ahead baseload power prices were stable in December on a month over month basis, but were up 6.5% year over year. With only two cable interconnections to France and the Netherlands, the UK's exposure to mainland European power surpluses is limited, and U.K. power prices have been significantly higher than in other northwest European markets.

UK day-ahead natural gas prices also extended gains seen in November, rising 1.4% month over month to end the year nearly 5% higher than the December 2012 average.

At Continental Europe's most liquid natural gas trading hub, the Dutch TTF, the average price of day-ahead natural gas in December was €27.68/MWh, up only slightly from November and up 1% year over year.

"European natural gas prices were at their highest at the start of December, when there was a cold spell and reduced Norwegian production," said Alex Froley, Platts energy analyst. "They then trended steadily lower across the course of the month on the back of mild weather and the Christmas/New Year holiday period, which kept demand in check."

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