German year-ahead baseload power jumps on higher carbon and oil

Supply factors positive on Monday

  

FRANKFURT- German year-ahead baseload power, the European wholesale market's benchmark contract, on Monday gained 4.7% to trade at 140 euros per megawatt hour (MWh), driven by higher carbon and oil prices. 

Spot power prices in the two main European markets of France and Germany were below Friday delivery on forecasts of stronger wind volumes, but investors were concerned about falling temperatures and merely stable gas imports, traders said. 

Weather forecasting models by brokers show a near or below normal temperature pattern until the year-end, although the latest reports on Monday ruled out extreme cold over the next fortnight.

Electricity forwards have trebled this year in response to factors including Asia's economic recovery from the pandemic, price gains in European carbon emission permits, higher oil prices and low local renewable output.

This has pressured industrial consumers that rely on continuous supply, burdened households struggling with bills, and, mainly in Britain, forced some energy suppliers into insolvency. 

December 2021 expiry European CO2 allowances were 2.7% higher at 74.71 euros a tonne, after reaching a contract high of 75.76 euros earlier.

INTER-RELATED

Prices in the power, gas, carbon and coal complex interact with each other, although each market can also respond differently to wind supply patterns, Russian gas deliveries and France's nuclear availability.

All three supply factors were steady or higher on Monday, but this is a temporary snapshot.

The Nord Stream 2 gas link from Russia to Germany is undergoing a licensing process that many in the market expect to take months, too late to relieve gas markets this winter. 

Europe's gas stocks, at just under 70% full, are lower than usual for the time of year after weaker imports as Asian buyers snapped up liquefied natural gas (LNG), data from industry group GIE showed.

This time last year, stock levels were at 89%.

Data from broker Marex showed Europe could have enough storage until mid-March, adding that industrial demand could fall depending on revised coronavirus-related restrictions.

However, grid operator RTE said last week that cold weather in the January-February period could strain supplies in France, which also exports to its European neighbours. 

And in Germany, three big nuclear plants out of six will close at year-end under a national exit plan. 

Coal-use has resurged in Europe this year because high gas prices and subnormal wind forced generators to use it, even if that meant they needed to buy more carbon permits.

Northern European delivery coal for 2022 last traded at $121 a tonne, having set a 13-year high of $191.5 in October.

(Reporting by Vera Eckert and Forrest Crellin; additional reporting by Susanna Twidale, Editing by Edmund Blair, Devika Syamnath and Barbara Lewis) ((vera.eckert@thomsonreuters.com; +49 30 2201 33654; @EckertVera;))


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