The record rise in energy prices, which has raised European electricity costs to multi-year highs, is unlikely to subside by the end of the year.
That indicates an expensive winter heating season for consumers, writes Reuters.
Key electricity reference agreements in the EU and France have doubled this year due to the interplay of several factors, from Asia’s economic recovery – which has led to soaring coal and gas prices – to the political will to raise European carbon emissions permits. higher oil prices and low local production from renewable sources.
The EU’s reference electricity contract, Germany’s Cal 2022 for base load, set a new record of 97.25 euros per megawatt hour (MWh) on Friday, while its French equivalent was a record 100.4 euros per MWh.
Although patterns of wind supply and Russian gas deliveries are considered market jokers, the current situation means a drop in electricity supply is likely, traders and analysts say.
Looking at the fourth quarter and the beginning of winter, both spot and forward prices draw strength from scarce supply bases, while the forecast cold and dry weather indicate sustainable demand and a modest supply of hydropower.
“All of our indicators of the weather and fuel market are increasing,” said Georgy Slavov, head of basic research at broker Marex Spectron.
The biggest unknown is the gas connection North Stream 2 (NS 2) from Russia to Germany, which could start operating in 2021 and greatly increase European gas supplies.
With around 70% occupancy, gas storage facilities are lower than usual after a weak import year in which Asian buyers snatched liquefied natural gas (LNG) and European industry recovered faster than expected from reduced demand due to the kovid 19 crisis. At this time last year, stocks were at 93%, data from the GIE industry group showed.
The construction of the 55 billion cubic meter NS 2 gas pipeline has been completed annually, ready to double Russia’s capacity to export gas across the Baltic Sea, but the German regulator has not yet given the green light, which could take months.
“As soon as the market realizes that a real flow is flowing through it, the gas market will go down,” Slavov said.
Demand for gas power plants was high due to lower average wind speeds in Europe, which limited the production of energy from wind farms. ICIS Energy analysts say wind energy production in Germany over the next two weeks is expected to average just 5 gigawatts (GW) compared to an average of over 10 GW over the previous three September. That is only a tenth of the potential capacity.
“If there are periods again in which wind production falls, which is in the nature of wind, there will be high prices again,” said ICIS Energy analyst Roy Manuell.
Also, other costs affecting electricity prices, such as carbon emissions permits, are unlikely to decrease. The EU’s CO2 reference treaty, currently € 62.4 per tonne, remains close to the record highs set this week, driven by more ambitious climate targets that increase the cost of pollution, but also by high electricity production. customers need more permits.
In the complex interactions between fuel and carbon dioxide, the demand for coal has increased as energy producers try to avoid high gas prices. Given that coal-fired plants emit twice as much carbon dioxide as gas-fired plants, this in turn has led to higher demand and higher CO2 permit prices.
European coal prices for electricity production are at a 12-year high, and at a 13-year high in Asia.
At least one factor, the availability of nuclear capacity in a major electricity exporter, France, should bring peace as engineers have worked hard to improve the fleet – although the picture of nuclear energy is mixed across Europe.
The current daily availability of nuclear energy in France is between 45 GW and 47 GW in September, which is about 73-75% of the total installed capacity and 6 to 7 GW above the five-year average, according to ICIS data obtained from the network company RTE. Availability in November and December should reach close to 90%.
E2 portal (B92)
Source: E2 Portal by www.e2.rs.
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