Analysis Insights
Electricity price at highest level since early 2023
After last week's decline, the gas price rebounded this week. The cold weather led to increased demand, but Donald Trump's victory also caused extra volatility in the energy markets. In addition, the electricity price reached its highest level since early last year.
The dip in the gas price from last week has been completely erased. Gas was traded at €40.30 per megawatt-hour on Tuesday, November 4. The gas price then rose steadily. By Monday, November 11, the price had risen to €43.40.
The main reason for the high prices is the low temperature. In recent weeks, Northern Europe has been colder than usual for this time of year. This led to an extra 8% gas consumption in the European Union last week. The expectation is that it will be slightly less cold next week. Temperatures are expected to be around the seasonal averages.
Trump's Victory
Meanwhile, the outcome of the American elections is reinforcing this effect. The gas market is trying to grasp the victory of Trump. The effects are still very unclear, but according to market analysts, the sentiments about what lies ahead are already causing extra volatility. The market is speculating about the possible effects of trade wars. According to ING analysts, it is likely that any trade wars will cause global energy prices to rise.
Furthermore, discussions about the effects on LNG imports are causing extra volatility in the gas markets. However, a Trump presidency may not be negative in this area. ING writes that with the American production of oil, the production of gas will also increase. This will lead to additional supply in the LNG market. In the long term, the effect will be even stronger, as it is expected that Trump will reverse Joe Biden's ban on new LNG ports. Additionally, it is quite likely that there will be less LNG exports to China. This will also benefit the European market.
For now, there is no relief in the liquefied gas market. The price of LNG remains roughly the same this week at €13.50. It is expected that this price will not decrease for the time being. If the winter turns out to be not very mild as in previous years, both European and Asian countries will demand LNG, keeping the price high. This clearly influences the European gas price, as about a third of European gas now comes from the LNG market.
Electricity Price Peaks Significantly
The electricity price was once again quite high last week, with a significant peak. Last week, the electricity price remained above €100 per megawatt-hour. Wednesday, November 6, saw a significant peak. That day, the EPEX reached the level of €181.37.
As a result, the electricity price reached its highest point since January 2023. The situation was approximately the same as in the last two weeks. The production of renewable sources is weak because especially the wind is not performing well. However, the situation was more extreme than in previous weeks. The total share of solar and wind energy this week was only 13.8%. For comparison, this percentage was around 50% for most of the year. The total solar panel generation was 8.2%. Meanwhile, wind energy production reached 5.6%.
As a result, many additional fossil sources were tapped for electricity production. In total, 57.4% of all electricity was generated by gas power plants. The share of coal power plants was 13.4%. Finally, 8% of all electricity was generated by biomass. This led to both a high electricity and gas price. Market analysts write that the weak production of wind turbines significantly influenced the gas demand, which was a clear factor in the rise in the TTF.
