European prompt power steps up as cold spell aligns with low wind

European prompt power prices rose sharply early December as a swing to cold and calm weather conditions transformed a bearish November into a bullish December.

Spot prices in France and Great Britain registered spikes during peak demand hours with very little wind, while Italy maintained its overall premium.

Further out, France's Q1 2023 contract eased 5% over a two week view as EDF returned more reactors with 40 of its 56 units now online.

German year-ahead power meanwhile rose 7% over the fortnight lifted by higher gas and carbon prices.

The benchmark contract briefly topped Eur400/MWh on Dec. 8 after trading below Eur300/MWh four weeks ago, EEX data showed.

Gas prices also gained on the back of colder weather. Platts, a unit of S&P Global Commodity Insights, last assessed the TTF front-month gas at Eur134.60/MWh on Dec. 8, up 10% over the fortnight.

Meanwhile year-ahead CIF ARA coal ended a volatile fortnight 9% higher at $249.40/mt, S&P Global data showed.

EUA carbon allowances meanwhile rose 12% over the two weeks, trading early Dec. 9 just below Eur89/mt, a level not seen since August.

German coal gains

In Germany, day-ahead baseload averaged Eur310.82/MWh from Nov. 24 to Dec. 8, up 87% over the fortnight, Epex Spot data showed.

Spot prices were particularly high early December peaking at Eur394/MWh.

German demand averaged 59 GW Dec. 1-8, data from Fraunhofer ISE showed.

This was down on the year driven mainly by lower industrial demand rather that household consumption.

Falling wind supply lifted the need for thermal generation with wind averaging around 10 GW.

Combined coal and lignite output ramped up to a 27 GW averaged Dec. 1-8, the data show.

"As next week will see a cold snap, that generates speculations about colder temperatures in January and February," a Swiss trader said.

On the curve, January settled Dec. 8 at Eur375.52/MWh, up 9% since Nov. 24, EEX data show.

Power prices received a boost from rising natural gas prices after unplanned outages in Norway.

Moreover, Germany's power market saw additional support from French nuclear delays.

"More of the perfect storm," a power trading source said after EDF announced another pushback.

French demand spikes

French day-ahead prices rose 78% over the fortnight to average Eur342.29/MWh with some hours spiking above Eur500/MWh.

Temperatures gradually fell below seasonal norms and were forecast to fall further in the coming days.

Peak demand for the week starting Dec. 12 is forecast to rise above 80 GW.

"It [the forecast] caused a huge volatility yesterday and today and over next weekend we are seeing mega high prices. Like possibly Eur1,000/MWh," a trader said Dec. 8.

Demand rose 18% over fortnight, but the 59 GW average was still 13% lower when compared to the same period last year.

Nuclear meanwhile ramped up to a 34 GW average compared to 42 GW for the same period in 2021.

Output on Dec. 9 reached 39 GW after EDF returned four more reactors.

Net imports rose except from Great Britain with Germany/Belgium sending 6 GW power to France followed by Spain at 2.5 GW.

France continued to export to Italy and Switzerland.

French wind output fell 45% to 3.6 GW, whilst solar was down 20% to 0.9 GW. Hydro gained 11% to 6 GW.

Further out, January was seen trading Dec. 9 at Eur630/MWh continuing its steady decline from levels above Eur1,000/MWh late October, EEX data showed.

By contrast, week-ahead also traded at Eur630/MWh on Dec. 9, but this was up 50% over the fortnight reflecting the near-term swing in fundamentals.

Spanish discount, Italian premium

Spanish day-ahead rose 36% to a Eur141.41/MWh average over the two week period, according to OMIE data.

Similarly, January settled at Eur154.33/MWh Dec. 8, up 11% from two weeks prior.

Gas generation for the period almost doubled and is 25% higher than for the same period in 2021.

Wind generation fell 56% over the fortnight, while solar gained 13%.

In Italy, day-ahead averaged Eur364.84/MWh so far in December, up 30% from Dec. 2021, GME data showed.

Spot prices in the North and Central North zones were considerably above the South including Sicily, on most days, as cold weather lifter demand in the region, while low renewable output increased the need for gas-fired generation.

Italian wind averaged just 1.8 GW Dec. 1-8, down 61% on the year, Terna data showed.

Hydro generation fell 19% to 3.26 GW. As a result, thermal output rose 4% on the year to 24 GW, most of which is gas.

UK wind fades

UK day-ahead baseload prices average GBP323.59/MWh Nov. 24 to Dec. 8, some 35% above the same period last year as temperatures fell below the seasonal average, according to S&P Global data.

A trader said Dec. 8 the key factors contributing to high prices were "cold weather, low wind and issues with the Norwegian Continental Shelve."

UK gas-fired generation ramped up 12% to average 15.8 GW over the period, while wind fell 11% to average 7.9 GW.

Hours with very low wind saw the biggest spikes with Nov. 29 peakload hours soaring above GBP1,000/MWh, exchange data showed.

Coal remained almost unchanged on the year at 0.8 GW.

Coal generation for Dec. 2-8 rose to 1.2 GW.

Net exports to France averaged 1.5 GW over the last two weeks, up 67% from a year ago.

MONTHLY AVERAGE POWER PRICES (Eur/MWh)

Source: Epex Spot, OMIE, GME, S&P Global (*GB converted into Eur/MWh)