Analysis Energy

Sun sets the tone on the electricity market

July 2, 2024 - Matthijs Bremer

While the gas price remained stable, the price of electricity was on the low side this week. The gas price remains in the grip of, on the one hand, large gas reserves and at the same time a high LNG price. Meanwhile, the electricity price is being pushed down by significant production of solar energy.

The gas price remains quite stable again this week. The TTF was at its highest point of the week on Tuesday, June 25. The price for a megawatt hour that day was €35.18. A day later, the price dropped significantly to €34.14. The price gradually recovered. On Monday, July 1, the gas price was €34.84.

Since Tuesday, May 22, the gas price has been quite constant. The gas price has been constant between €33 and €36.25 for the last one and a half months. Since June 10, the price has even been between €34.50 and €35.75. The stability is the result of a precarious balance between full gas reserves and weak supply. The gas reserves are currently 77% full. That is much fuller than usual. However, the filling is still slow. Last week, the fill rate was 74%. Although the pace seems to be increasing slightly. In recent weeks, the fill rate increased by 2 percentage points. This week, the reserves increased by 3 percentage points.

High LNG Price
Especially the high demand for LNG in Asia remains a thorn in Europe's side. The leading Asian LNG price has decreased slightly from the peak of Tuesday, May 25, of $12.74 per mmbtu. On Friday, June 28, the price dropped to $12.64, bringing the LNG price back to the level of mid-July.

The main reason the prices remain high is the high temperature in the northern hemisphere. Especially in Asia, it is warm and the demand for electricity for air conditioning continues to keep the LNG prices high. This means that even American LNG on the spot market is mainly destined for Asia. Generally, since the war in Ukraine, the United States has been exporting at least half of their LNG to Europe. As long as temperatures in the Asian market remain high, a decrease in the LNG price is unlikely and a decrease in the European gas price also seems unlikely.

Favorable but Stable Electricity Price
Meanwhile, the price of electricity was on the low side and quite stable. On Monday, July 1, the electricity price reached its highest point of the week at $88.83 per megawatt hour. Prior to that, the price reached a peak on Thursday, June 27, at only €74.54. The price reached its lowest point on Sunday, June 30. On that day, the price per megawatt hour was €45.75.

Actually, only one factor was relevant in the electricity market, and that was the generation of solar energy. In total, only 53% of the solar energy was generated through solar collectors. Add 12.4% wind energy to that and you get a total of 65.4% of this renewable energy. Due to the significant generation of solar energy, only 23.1% of all electricity was generated by gas.

When the gas power plants were indeed ramped up, you could see the price rise immediately this week. So, on Sunday, June 30, the electricity price did not drop to just above €0, as we often saw in recent weeks on sunny days, since the amount of solar energy that day was slightly lower. That day, the level dropped only to just above €45. The production peak that day was 17.72 gigawatts. On various weekdays, the peaks rose above 20 gigawatts, with a peak of 24 gigawatts on Friday, June 28.

Higher Prices
Despite the increase in the percentage of renewable energy, the electricity price in June has slightly increased compared to the previous month. The average price was €68 per megawatt hour. In May, the average price was €66. The price increase is due to the higher gas price. The higher production from renewable sources was not able to offset that increase.

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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