Analysis Energy
Renewable sources did not deliver
The gas price remained fairly stable last and early this week. The weather forecasts are variable, and larger LNG imports are keeping prices at a steady level. On the other hand, the electricity price was on the high side, mainly due to low production from renewable energy sources.
The gas price was quite stable this week. On October 15, gas was traded at €39.97 per megawatt-hour. After a slight drop, the price corrected back to €39.81 later this week.
The weather forecasts contribute to the balance in the gas market. In the short term, temperatures in Northern Europe remain above average for this time of year. This results in lower gas demand for heating than expected. However, long-term forecasts show a decrease in temperatures in Northern Europe.
LNG filling drives prices up
The higher level of the gas price clearly helps Europe to obtain more gas. For the first time in a long time, European LNG imports are increasing significantly. Currently, Europe's LNG imports are at their highest point since April.
The larger LNG imports are mainly related to the development of the fill rate. Gas reserves have remained relatively constant in recent weeks. By the end of September, gas reserves were filled to roughly 94%. Since then, the gas reserves have increased by another percentage point to 95%. To maintain the reserves, the filling of reserves has returned to the average level. Since the end of August, the rate at which reserves are being replenished has been significantly below the historical average.
The renewed competition in the LNG market is not leading to downward momentum in the liquefied gas market. Almost all of last week, the leading Asian LNG price increased from $13.11 per MMBtu on October 15 to $13.50 on October 17. However, most of that increase was erased by the end of the week. By Friday, October 18, the price of liquefied gas had dropped to $13.28.
Electricity price shows strange pattern
The electricity price has been predominantly high in recent days, although excessive peaks have been avoided. Only two days last week did the electricity price drop below €80 per megawatt-hour. One day, the price exceeded €100. Remarkably, one of those days was Wednesday. On that day, the electricity price fell to €38.71. On Sunday, October 20, the electricity price was even slightly lower. That day, electricity was traded at €34.51 per day.
The dip on Wednesday is particularly noteworthy. The demand is generally high at this stage of the week. Typically, electricity prices in the middle of the week are on the high side because offices are full and industries are running at full capacity.
Renewable sources fall short
This peculiar trend is directly related to production from renewable sources. Significant amounts of wind energy were only generated on Thursday and Sunday. This leads to prices being suppressed almost all day. On other days, solar energy was dominant. This results in significantly lower prices when demand is highest, but does not affect the electricity price outside working hours. This led to predominantly high prices without excessive peaks.
The total generation from renewable sources was also low this week, resulting in high prices. In total, 11.9% of the electricity was generated from solar energy. The percentage of wind energy totaled 23.5%. This makes the total percentage of 'free' energy almost 35.4%. This is significantly lower than the rest of the year. Usually, this percentage is well above 50%. Due to the low productivity of these sources, 42% of all electricity was generated by expensive gas. Additionally, there was 7.3% of coal-generated electricity and another 7.3% from biomass.
