European Power Prices Fell in April Relieving Cost Pressures on Corporates

Record wind and solar output in Germany helped to push down European day-ahead power prices in April, a key cost for European businesses, while day-ahead natural gas prices fell as UK storage concerns eased, according to the latest power cost figures from data provider Platts. 

The Platts Continental Power (CONTI) Index fell 18% in April compared to March, from €55.02 per megawatt hour (MWh) to €45.20 MWh. There were a number of days of record power output from renewable, or green, sources in Germany last month, culminating on 24 April when solar photovoltaic output exceeded 23 gigawatts (GW), meeting a third of the preeminent European economy’s working-day afternoon demand. 

The Platts CONTI index is a demand-weighted baseload average measurement of day-ahead contracts assessed in Germany, Switzerland, France, Belgium and the Netherlands. The Platts UK assessments reflect day-ahead contracts assessed for firm delivery of power on the high voltage network of England, Wales and Scotland, and at the National Balancing Point for gas, and showed an easing in gas prices for the island nation. The assessments reflect prices as determined between buyer and seller in the open physical markets, and the fall in prices should help struggling European corporates. 

Natural gas prices in the UK and on the European continent slipped from March highs as warmer weather and deliveries of liquefied natural gas (LNG) took pressure off shrinking inventories in storage. The UK’s average day-ahead natural gas price in April was down 19% from March, while the price at continental Europe’s most liquid hub, the Dutch TTF, was down 12% month-over-month, according to Platts. However, on a year-over-year basis, UK and continental day-ahead gas prices remain more expensive than they were – up 17% and 14% respectively year-on-year, which is why treasurers will welcome any fall in what has up until now been an increasing cost. 

“Prices of power for immediate delivery turned bearish across Europe last month, with healthy wind, solar and hydro power output more than offsetting Germany’s production slowdown from the nuclear plant maintenance period,” said Andreas Franke, Platts power editor. “German day-ahead, peak-load power output for a week day fell to a record low April 18 at €27.15 MWh, as wind and solar power output reached an hourly record of 36 GW.” 

Further out the curve, prices of European power for future-dated contracts with treasurers, governments and other large users fell heavily on 22 April, following the European Parliament’s rejection of the European Commission plan to delay the auctioning of carbon emissions (CO2) allowances in the European Union’s Emissions Trading System (ETS). The vote triggered a 30% drop in the price of CO2 allowances to below €3 per metric tonne. 

The stalled ETS programme, which charges firms on their CO2 output and designed to cut carbon emissions and fight global warming via a trading scheme, is it seems increasingly struggling for friends in a contracting European economy. 

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