European power prices continue to drop, down 60-70% from their August peak. However, that trend may end as early as this week if weather forecasts for weaker winds bears out.

Europe

European power prices saw a falling trend for the sixth week in a row, down 60-70% in the large continental markets since the peak in late August, driven by strong wind power, falling gas prices, and mild weather. The trend could stop already this week, as wind speeds across the continent slows.

In this scenario, prices are expected back above the €200-€300 per MWh range in continental Europe.

For the sixth week running, European power prices were trending down last week, on falling gas prices, strong renewables generation and mild weather for the year.

The Nordic region saw the overall largest price decrease last week, with a massive 54% decline in prices compared to the previous week on the Nordic system price.

This was also a further decline from already much lower levels than seen on the continent, with the average price last week being €60.0 per MWh.

The large decline last week also resulted in the Nordic region seeing the overall largest drop in prices since the peak in late August, with a 91.2% fall in prices.

German prices also saw a very large decline last week, closing the gap to British power prices.

German prices averaged just €159 last week, with prices reduced by 64% since the top in week 34.

Particularly high wind speeds were the cause, as this impacts German prices even more than its neighbors.

While the UK also saw a large fall in prices last week, it was not as large as in Germany, where one effect was that the gap between the TTF European benchmark and the NBP British benchmark price was closed significantly.

Average UK prices for the week was €156 per MWh, now only marginally lower than in Germany.

An interesting observation is that both British and German prices were very close to Spanish prices last week, despite Spain having implemented a gas price cap to reduce prices, while no such thing is in place in Germany and the UK at the moment.

While the share of wind power in the Powermix on a yearly level is roughly the same for the three countries, 20-23% last year, Spain and the UK are both much more exposed to the gas market than Germany.

Spain also did not have the same strong wind power generation as the UK and Germany last week, contributing to the gap.

Prices have now been on a declining trend for six weeks, but the trend could stop already this week.

Both Continental and British wind power is expected to fall significantly compared to the last two weeks, which has been reflected in the prices for the first two days of the week, with higher prices in the range of €200-€300 per MWh as daily averages.

On the bearish side, temperatures are expected to stay higher than normal, which is expected to drag down demand and therefore also prices.

Another factor that could ease some of the pressure going forward is increased output from French nuclear, now back above 50% utilization, but still at historically low levels for this time of the year.

The gas market remains an important driver, and increasingly so going forward as overall power demand is expected to increase.

There remains a lot of uncertainty about gas prices going forward, and if the falling trend will continue.

The TTF spot contract has now been falling by 68% since the peak in late August, down from €330 per MWh to €105 at closing on Friday last week.

Last week also saw a continued decline in the futures market, where the TTF fell an additional 8%, closing the week at €155.

A large gap has emerged between the TTF spot contract and TTF futures contracts, as the spot traded at a discount of €70-80 per MWh at the highest-level last week.

Figure 2 below shows the development of both contracts over the last year, and it is clear that the difference has never been as big as it was last week.

The TTF spot closed as low as €92 on Wednesday last week, while the TTF front-month closed at €176 the same day, making the premium a whooping €84.

Factors contributing to the large delta are weak demand in the spot market caused by strong renewable generation, mild wheatgerm, strong Norwegian flows and LNG imports, in addition to storage levels reaching close to the maximum across Europe.

Low liquidity in the market is also causing higher volatility than usual, but the delta has persistent into this week as well.

Some of the premium for the front month is also that demand is expected to be much higher going forward, due to colder weather compared to now, pushing prices upwards in the futures market compared to the spot.

EU energy ministers met again on Friday last week, but no concrete proposals on a general gas price cap were reached.

Consensus within the EU has not been reached, as some countries are pushing back against a potential cap due to the large negative effects it could have on the demand and supply balance.

North America

Average US power prices across observed markets rose to $58.40/MWh last week from $52.09/MWh the week prior despite lower demand and a drop in natural gas spot prices.

However, these prices are still lower than the higher-than-$70.00/MWh average prices seen throughout August and early September.

Weekly power generation from wind fell by 33% (more than 1 TWh) between last week and the prior week, suggesting that wind generation has a recognizable impact on US power prices. All carbon-based thermal generation increased last week over the previous, while all carbon-free generation fell between the two weeks. This should signal that investments in clean energy have the added effect of reducing power prices in the US.

Florida is still recovering from damages from Hurricane Ian.

Demand levels have risen to an average of over 650 GWh per day last week.

This is an improvement from the 518 GWh reported on September 29, but still below the roughly 700 GWh average per day for the same week last year. As of this writing, there are still over 25,000 customers without power in Florida, with 83% of those outages located in Lee County.

Over 5.1 million customers lost power across Florida and the Carolinas from damages caused by Hurricane Ian.