Weekly energy market update:
EU gas prices declined -12% w-o-w due to increased renewable generation & warm weather, while carbon prices increased +10% w-o-w following the financial market recovery.
The fighting in Ukraine continues to present a strong upside risk in the case of intentional or accidental damage to the pipeline pumping Russian gas into Europe causing even a short-term supply disruption.
Gas typically sets the wholesale electricity price in European markets. Each €1/MWh movement in gas price moves power by €2/MWh.
Carbon prices can continue to trade higher amid the bullish correction of the stock markets and because coal-fired generation is now expected to be utilized more in both the transition to renewables and the transition away from Russian gas. Hence, more carbon buying demand from coal power plants will be keeping the carbon market price supported.
Also, in order to limit the market price risks linked to the next Winter period, the EU Commission intends to present by April a legislative proposal requiring underground gas storage across the EU to be filled up to at least 90% of its capacity by 1 October each year.
Overall, the power market price volatility will continue to be elevated in the coming weeks/ months as further developments of the war in Ukraine will remain a dominant driver.
To read the prior week’s Energy Market Update, please follow the link here.
