Analysis Energy
Gas price just below the 50 euro mark
The price of gas has risen again this week. Colder weather and uncertainty about the supply led to higher prices at the TTF. Meanwhile, the price of electricity decreased due to more favorable generation from renewable sources.
The gas price is once again moving up this week. On November 19, gas was traded at €45.67 per megawatt-hour. By Monday, November 25, the price had risen to €48.15.
The gas price remains influenced by the temperature. Lower temperatures are expected in Northern Europe at the end of November. In the Netherlands, temperatures are forecasted to be around 2 to 3 degrees at night and 6 to 7 degrees during the day just before December. This is lower than the average temperature for this time of year, which is around 5 degrees. The expectation is that these temperatures will lead to higher heating demand.
However, the temperatures are not too far from the average. From December onwards, temperatures are expected to be around the seasonal norm. The higher price is mainly a result of uncertain supply. Until Monday, November 25, Russian gas supply remained stable despite a dispute with the Austrian energy company OMV. After OMV won an arbitration case against the Russian state company Gazprom, the energy company announced it would claim €230 million worth of gas, as revealed on Monday. This marks the end of a fifty-year trading relationship.
Market expectations are that Europe will soon face a shortage of Russian gas. The Ukrainian transit contract for Russian gas to Europe expires on January 1, 2025. The war-torn country is no longer willing to transit Russian gas. In 2023, 14.8% of European gas still came from Russia, with 8.7% being pipeline gas. This volume will now be lost. The hope is pinned on a quick deal with Azerbaijan. The country could take over Russia's old volumes and deliver them through Ukraine. However, the deal has not been finalized yet.
Reserves depleting rapidly
Due to the imbalance between supply and demand, the level of gas reserves is depleting almost twice as fast as usual. As a result, the reserves are now only 88% filled. At the beginning of November, the filling level was still at 95.5%.
For now, it seems that Europe is reliant on the LNG market, and that comes at a cost. Europe is actively competing with Asia. This has led to LNG prices around $15 per MMBtu, translating to over €48 per megawatt-hour. Last week, the LNG price was around €13.50 per MMBtu.
Electricity price decreased
Electricity prices have decreased this week compared to the previous week. The price was at its highest on Thursday, November 21, at €121.96. In the weekend, the price dropped significantly. On Sunday, November 24, the price fell to €13.74.
Contrary to recent weeks, renewable sources contributed to a significant decrease in the electricity price. In total, 37.5% of all electricity was generated by wind turbines. Adding 6% from solar energy brings the total share of renewable energy to 43.5%, significantly higher than the past two weeks. Last week, the production from these sources was only 27.3%. As a result of increased generation from renewable sources, the electricity price decreased notably towards the end of the week. Wind power increased significantly from Thursday onwards, along with an increase in solar hours.
Due to the higher production from renewable sources, the share of gas power plants decreased to 30.4%. Strong utilization of coal-fired power plants and a significant share of biomass also contributed to the price decrease. Coal power plants generated 10.8% of the electricity, while biomass accounted for 7.7% this week.
On Sunday, November 24, a considerable amount of renewable energy was generated. There was a nearly constant supply of roughly 10 gigawatts of wind energy every 10 minutes. Additionally, there was a substantial amount of solar energy, peaking at 6.7 gigawatts every ten minutes.
