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Analysis Energy

Gas price takes a significant step downwards

April 28, 2024 - By our team of market reporters

After the rise in gas prices, the TTF course has turned again. Especially the moderate reaction of Israel to the Iranian missile rain brings calm to the market. Remarkably, the large production of solar and wind energy does not manage to push down the price on the electricity market in the meantime.

The price of gas has dropped again after last week's peak. On Tuesday, April 16, gas was traded for €33.14 per megawatt-hour. After that, the TTF fluctuated a bit, but the gas price has dropped to €29.56.

Since the gas price reached the highest price in three months last Tuesday, the TTF has dropped by 10.8%. This is mainly because the market is less anxious about the situation in the Middle East. Last week, the market was mainly concerned about how Israel would react to the Iranian missile and drone attack, as excessive escalation could have consequences for LNG imports from Qatar.

According to analysts, Israel's reaction is smaller than expected. The market's fear was that Israel would retaliate strongly, which could invite a spiral of escalation. Last Friday, Israel sent three drones to the Iranian city of Isfahan. With this action, the country hopes to have found a way out of the spiral. Initially, Iran was able to minimize the action. This gives the market confidence that the spiral is currently paused.

Unstable
Although the gas price is no longer at its highest point in three months, there is certainly no constant decline. The main reason the gas price remains unstable is due to geopolitical tensions. Particularly, Russian attacks on Ukrainian gas infrastructure continue to cause tension. Additionally, the cold period is not helping. For example, the temperature in Europe's largest gas consumer, Germany, was 3.8 degrees below the average temperature for this time of year. This week, the temperature was even 4.5 degrees below the five-year average.

Sun and wind set the tone
Meanwhile, the electricity price fluctuated wildly. On Tuesday, April 16, electricity was traded for €51.89. The next day (Tuesday, April 17), the EPEX peaked at €98.72, only to drop to €48.32 on Friday, April 19. Over the weekend, the price remained around that level, but on Monday, the electricity price rose again to above €90.

In the electricity market, as was the case last week, solar and wind dominated. In total, 27.7% of the energy was generated from these two renewable sources. Solar energy accounted for 45% of the demand. In total, this results in 72.7% of virtually free electricity. However, prices are not as low as last week. Especially during the weekend, the declines were not as low. This resulted in a share of only 17.6% from gas-fired power plants.

Nevertheless, prices are significantly higher than a week ago. It is noticeable that prices are particularly low on days when wind energy shows a less constant pattern. For example, it was windy on Tuesday and Friday. Over the weekend, the wind was not too strong but constant. Along with lower demand, this put pressure on prices. On days when solar energy dominates the energy mix, a significant amount of solar and wind energy was disconnected. This resulted in eleven hours with negative prices over the day and higher prices, especially in the evening. This effect was further amplified by substantial electricity exports when it was windy. Because the Netherlands could easily dispose of the energy surpluses abroad, the price dropped less than in other weeks.

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