A bull market for European electricity is being helped to be extended by a drop off in expected supply from German reactors this winter and the lowest French nuclear availability for the time of year since at least 2009.
According to broker data compiled by Bloomberg, while the French power for the three months to March gained 63 percent, German power for the same rose 28 percent since the start of September. According to Pira Energy, as France will have to import more power next month during times of high demand, prices could rise even further.
After operator Electricite de France SA announced it needed to halt 18 units for safety checks, France has seven fewer reactors available than at the same time last year. With the fleet not back to full strength until the end of January, according to data from European Energy Exchange AG, that comes as only about 60 percent of German atomic plants will be available from Dec. 30 because of maintenance.
“Once we get high demand combined with that relatively low nuclear availability in France, we may see high prices. And they may potentially spill over to other countries,” Niek den Hollander, head of Vattenfall AB’s trading unit in Hamburg, said in an interview.
Sending the premium over the comparable German contract to 73 percent or 26.70 euros a megawatt-hour, French prices for November rose to a record on Friday before slipping 0.2 percent. According to Omar Ramdani, head of analysis at RheinEnergie Trading GmbH, this means that opposite to the normal flows during winter, Germany will probably ship power to France.
“If there is tightness in France because of reactors, Germany would export and that would push power up prices,” he said. Flows will still be limited by constraints at the border, he said.
Created by increased renewable energy generation, Germany still has an oversupply of power despite the expected reduced nuclear supply. Broker data show that the year-ahead benchmark fell to the lowest since at least 2007 in February after declining for the past five years. With reduced operating hours and profitability near the lowest in five years, a short-term increase in prices is unlikely to help coal-fed power plants that are struggling to make money.
According to data from grid operator RTE, compared with 78 percent at the same time in 2015, French nuclear availability is at about 63 percent. After safety checks on some steam generators were taking longer than expected, EDF cut output targets for its 58 French reactors this year on Sept. 21.
Bruno Brunetti, a senior director for electricity at Pira in New York said that when demand rises above 70 gigawatts, power supplies will be “tight” with so many reactors offline. He expects 90 hours where the market is tight next month. RTE forecasts this week’s peak at 57 gigawatts.
Due to the highest carbon prices in more than three months and a 62 percent increase in European coal this year, German power prices are also benefiting in addition to the boost from France. According to Roland Vetter, head of research at Praxis Utility and Infrastructure Equity Fund Ltd., A 1 euro rise in carbon adds 60 euro cents to the power price and a $1 increase in coal adds 0.33 cents.
(Adapted from Bloomberg)