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Analysis Energy

Politics Stirring Unrest in the Power Market

May 28, 2024 - Alex Jurvillier

Russia continues to loom as a dark shadow over the European gas market. This week there was trouble between an Austrian energy company and Gazprom. Electricity on the Epex was somewhat more stable for a change. The newly forming cabinet is causing more unrest with plans to scrap the net metering scheme.

The prices of the TTF Dutch gas index fell from €35.228 to €34.115 per MWh before the weekend. This decline may have been influenced by predictions of warmer weather. It's too early to say that summer weather is on the way. A combination of sun and wind is likely to lead to more green energy production and less reliance on gas power plants, potentially resulting in reduced gas consumption. Yesterday, the price rose slightly to €35.243 per MWh.

Another news headline last week involved the Austrian OMV, a supplier of oil and gas, having issues with Russian Gazprom. Direct payments from OMV to Gazprom could potentially be declared illegal by the court. This uncertainty in Russian gas supply to the company is causing turmoil in the European gas market.

Electricity
Regarding electricity, prices have been fluctuating in recent days. Yesterday, it stood at €90.05 per MWh, a significant increase compared to Sunday when the Epex Spot day-ahead price was €56.60 per MWh. However, such fluctuations are not uncommon in this market.

Ukraine has expressed its desire to import more electricity from Europe, as reported by Reuters. Due to Russian missile attacks, Ukraine's energy production has been affected, according to the Ukrainian electricity grid operator. The damage caused by Russia in the Ukrainian energy sector is estimated at around $1 billion, resulting in the loss of approximately 8,000 MWh of energy according to the Ukrainian government. To maintain grid stability, Ukraine aims to import up to 16,258 MWh during peak periods, as stated by the grid operator Ukrenergo.

Solar panels still generate income without net metering
In the budget appendix of the coalition agreement, the parties of the new government state their intention to abolish the net metering scheme by 2027 for small consumers. This means that (small) businesses and residential users will no longer be able to offset excess summer-generated electricity against higher winter consumption. The solar panel industry has strongly criticized this abrupt change. Uncertainty over the payback period, particularly due to issues like the net metering scheme, is discouraging investments in solar panels. Last year, a proposal for a gradual phase-out of the net metering scheme was rejected by parliament.

Even if the net metering scheme is abolished for small consumers (with a connection of up to three times 80 amperes), solar panels remain profitable according to Essent. Energy generated by solar panels can still be cost-effective, as stated by the energy provider. Through Essent's subsidiary EnergieWonen, on average, 70% self-consumption of solar energy can lead to cost recovery in eight years. Subsequently, users can enjoy the benefits for another seventeen years and save €600 annually.

Essent suggests that excess energy production can be managed by aligning the number of solar panels on the roof with personal energy consumption. Additionally, installing a charging station powered by solar energy or a home battery could offer a solution. Customers will also be approached in the near future regarding a home battery trial.

Alex Jurvillier

Alex Jurvillier is a market specialist in sugar and cacao at DCA Market Intelligence. He also monitors the milk supply in the most important dairy countries and keeps an eye on developments in food.
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