Analysis Energy
Electricity significantly cheaper due to wind power
The prices on the energy markets have been somewhat tempered this week. Full reserves caused the gas price in the European Union to take a step back. Additionally, the conditions for generating renewable energy were favorable, leading to a decrease in the electricity price.
Compared to last week, the gas price has taken another step downwards. On Monday, August 19, gas was still traded at €39.85 per megawatt-hour. However, by Monday, August 26, the price had dropped to €36.42.
The gas price failed to maintain its level around €40. This is mainly due to the high storage level, which tempers the upward price pressure from the lower Russian supply. Currently, the reserves are filled to 91.2%. Historically, the storage level at this time of the year averages around 80.2%. However, the potential for further decline is not significant. The supply to Europe remains low, keeping the risks of long-term shortages. This prevents a steep decline so far.
LNG remains expensive
Furthermore, a high LNG price is keeping the TTF at a steady level. On Friday, August 23, the globally leading LNG price index of Japan and South Korea stood at $13.82 per mmBtu. This is considerably lower than the peak of August 19 at €14.66 mmBtu, but still significantly higher than the level of the rest of the summer, which ranged between $12 and $12.50.
Asia has been experiencing hot weather all summer, and this has not changed. As a result, LNG imports to the continent reached the highest point in seven months in August, totaling 25.03 million tons. China, in particular, increased its imports. In August, imports rose by over 1 million tons from 5.91 million tons to 6.94 million tons, according to data from maritime data agency Kpler. Analysts attribute the higher consumption to increased demand for freight transport.
Gas price barely affects electricity market
The electricity price also took a clear step down this week. On Tuesday, August 20, electricity was traded at €84.25. Subsequently, the price remained consistently lower. Between Thursday, August 22, and Sunday, August 25, the price stayed below €50, reaching a low point on the latter day at €20.78. On Monday, August 26, the gas price was at €83.01.
Consequently, the electricity price was significantly lower than the previous week when the price of electricity exceeded €100 three times during the week. The lower gas price was of limited importance as very favorable weather for renewable energy generation meant the gas price was hardly a significant factor. In total, only 16.3% of all energy was generated by gas turbines.
In total, solar and wind power accounted for 67.3% of the entire electricity demand. It is noteworthy that more wind energy was generated last week than solar energy. Wind turbines generated 34.7% of the energy in total, compared to 32.6% from solar energy. This resulted in a constant downward pressure on the electricity price, as high wind speeds are relatively evenly distributed throughout the day. Add to that plenty of sunny hours during office hours on the main production days, and you have the recipe for a relatively favorable electricity price.
