Winter power demand in EU's main gas markets forecast 5.3% lower: S&P Global

Winter power demand across the EU's main gas-fired power markets is forecast some 5.3% below the five-year average, analysis by S&P Global Commodity Insights shows.

November-to-March demand in eight EU member states including Germany, France, Spain and Italy is estimated to average around 216 GW, down 12 GW on the five year average.

The European Commission on Sept. 14 proposed a mandatory 5% peakload power demand cut target to reduce gas-for-power demand and peakload power prices.

"Proposals to cut peak demand alleviate some of the risk premium embedded in the market, but our forecast remains bearish as we see near-curve risk premiums overdone," senior power analyst at S&P Global Sabrina Kernbichler said.

French spikes

"Although our forecast is bearish, price risk is largely to the upside as low nuclear and hydro leaves markets reliant on gas," Kernbichler said, noting that November looked especially risky, especially for France.

French peakload power prices for November spiked above Eur2,000/MWh in August, with France sensitive to electric heat demand during cold snaps.

In its winter outlook Sept. 14 system operator RTE warned of an extended tight supply/demand situation, not least due to poor nuclear availability, but added that estimated demand peaks of 95 GW could be reduced by around 9 GW with market-driven demand curbs and load shedding.

Load shifting

S&P Global estimates Germany and France would need to contribute demand reductions of 4 GW each to the EU's 5% target in November through to February.

This is followed by Italy and Spain with around 2 GW each and the Netherlands with around 1 GW.

Authorities and grid operators may want to encourage load shifting whereby consumption is moved away from peakload periods.

On Sept. 14 EC President Ursula von der Leyen referenced a ceramics factory in Italy, which had moved shifts to the early morning to benefit from lower energy prices.

"Load shifting away from peakload hours is something we have observed," S&P Global's Kernbichler said, adding that "more demand shifting would have to materialize compared with the outright decline."

"So far in September, Italian power demand averaged 36.8 GW, just 1% below the 2017-2021 average, but with a notable shift in hourly demand to the lower-priced overnight hours, particularly in the northern industry-intensive region of Italy," the analyst added.

France's RTE relies on its EcoWatt warning system to alert consumers about demand spikes focused on peakload hours 0800 to 1300 and 1800 to 2000, it said.

Total power demand in the four months in high winter in France and Germany of 370 TWh combined is almost double the combined demand in Spain and Italy.

Other EU member states in the Nordics, Baltics, Eastern and Southeastern Europe as well as the island nations are mostly less overall reliant on gas in their power mix.

Platts, a unit of S&P Global, assessed the benchmark TTF front-month gas contract at a record Eur319.98/MWh Aug. 26 falling to Eur183/MWh Sept. 21.

The TTF remains at a premium to LNG spot price assessments both in Europe and the JKM in Asia as well as some European gas hubs with high LNG intake capacity like Spain and France, S&P Global pricing data show.

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