Analysis Energy

Electricity and gas far from stable

June 4, 2024 - Matthijs Bremer

The gas and electricity prices were fairly unstable this week. While the gas price rose due to higher temperature forecasts for the summer, the substantial production from renewable sources did not tame the electricity prices.

The gas price is currently far from stable. On Tuesday, May 28, gas was traded for €33.83 per megawatt-hour. The price then fluctuated significantly. On Monday, June 3, the gas price rose to €36.06.

Just under a month ago, low temperatures led to a high gas price as heating systems remained on late into the year. The situation has now reversed, with an expected heatwave causing a higher gas price. Various meteorological institutes predict that this summer in southern Europe will be characterized by significant heatwaves.

Warm weather is expected especially in France and Spain. Additionally, temperatures above 30 degrees are expected in Eastern Europe in mid-June. Later in the summer, temperatures in Northern Europe will also rise significantly, as indicated by long-term forecasts from various meteorological institutes. Market expectations are that the demand for gas will increase due to greater use of air conditioning units.

LNG price also reacts to heat
High prices continue to dominate in Asia as well. Several heatwaves have pushed the Asian spot price for LNG to high levels. India in particular is purchasing additional LNG on the spot market as electricity demand has risen sharply. The country's capital is breaking temperature records at 52.9 degrees Celsius. South Korea and Japan are also buying LNG for early June/late July, as higher temperatures are expected during that period.

Despite the hot weather, prices have dropped slightly from $12 per British thermal unit (mmBtu) to 12 per mmBtu. However, the price is still at its second-highest point in six months. The decrease is mainly a correction from a very high price. This high LNG price also influences the TTF, as there is still extra liquefied gas to replenish reserves to around 100% by the end of summer.

Renewable sources do not suppress electricity prices
Meanwhile, electricity prices remain high. On Tuesday, May 28, electricity was traded for €82.29 per megawatt-hour. The price fluctuated on weekdays, but decreased over the weekend. On Sunday, June 2, the price dropped to €8.17. However, on Monday, June 3, the price rose again to €102.29.

Remarkably, the high gas price barely played a role in the high electricity prices. Although the higher gas price leads to higher base consumption, the utilization of the gas power plant was quite limited at 22.7%. A significant production of both solar and wind energy together reduced gas consumption. In total, 30.7% of all Dutch electricity was generated by solar panels, and the total share of wind energy reached 33.2%. This resulted in 63.9% of all electricity being generated from virtually free sources.

The high prices are a result of the efficient utilization of electricity from renewable sources, with negative prices rarely occurring. This is partly due to significant exports. Particularly on the night of Saturday to Sunday, the Netherlands exported a considerable amount of the excess electricity generated from wind energy. However, the export that day was less effective in maintaining the price level compared to previous days. On Thursday and Friday, a lot of electricity was also exported. On those days, the export prevented the large production of renewable energy from significantly lowering prices.

Matthijs Bremer

Matthijs Bremer is a market specialist in pork, beef, and poultry meat at DCA Market Intelligence. He also monitors the protein transition, keeping an eye on developments in cultured meat and meat substitutes.

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