Strong wind and hydro bearish for this week's SEE power prices

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Strong wind and hydro bearish for this week's SEE power prices – EQ

Date: December 8^th 2021

Author: Tanja Srnovršnik

Category: Trading

Topic: Electricity

South-east European spot power prices should be about EUR 15/MWh lower this week than was expected a week ago due to strong wind and hydro power output, according to Montel’s Energy Quantified (EQ) data.

Romania's wind power generation is forecast to average 1.46 GW this week, 0.21 GW more than last week and 0.64 GW more than two weeks ago.

South-east Europe is also currently seeing very strong precipitation, rising river flows and above-normal hydropower levels, said Eylert Ellefsen, senior analyst and hydrology expert at EQ, late on Tuesday. “Hydro power output has increased by 50% since last week, which has been a bearish factor for SEE prices too,” he added.

Gas and coal markets have also become slightly bearish since last week, although supply concerns amid diminished storage and below-average temperatures bolstered the January contract on the benchmark Dutch TTF trading hub toward EUR 96/MWh on Ice Endex on Tuesday. Coal prices also rose yesterday.

Furthermore, European carbon prices reached a new record high of over EUR 87/t on Wednesday, extending a streak of gains that has seen the market rise roughly 40% over the last month.

Despite this increase in fuel and carbon prices, stronger power production has had an alleviating effect on regional spot prices. EQ expects regional spot prices to average from EUR 210.63/MWh in Bulgaria to EUR 236.06/MWh in Slovenia this week, down from the EUR 226.380/MWh and EUR 253.96/MWh that was forecast for those respective countries last week.

The day-ahead baseload prices for delivery on 8 December were the highest in Hungary, where they reached EUR 222.49/MWh, followed by 221.44/MWh in Slovenia and Croatia. Spot prices were EUR 219.58/MWh in Bulgaria and Romania, while they traded at EUR 198.26/MWh on the Serbian Seepex exchange.

Another rise next week

Next week, EQ forecasts a moderate EUR 10-15/MWh weekly increase in SEE spot prices, said Ellefsen, adding that the region will be strongly influenced by a bullish central western European market due to low wind output.

Wind power output in SEE is expected to remain close to normal, as are temperatures, but consumption is expected to increase moderately, said Ellefsen. Hydro power output will reach 3.3 GW, slightly more than this week, EQ's data shows.

Hungary can expect the highest prices next week, around EUR 246.59/MWh, followed by Romania with average prices of EUR 246.14/MWh. Bulgaria should witness the biggest jump in power prices compared to this week, rising by over EUR 30/MWh.