Power prices remain high in both Europe and Asia as the northern hemisphere begins to focus on restocking. In the southern hemisphere, India has just 9 days of coal supply heading into the start of its high consumption season.
Here is Rystad Energy’s weekly power market note from analyst Fabian Rønningen:
Although European power prices are slightly down from recent highs, they remain elevated across the continent.
France and Italy averaged the highest prices, with €294 per MWh and €274, respectively.
Germany and the Nordics benefitted from much lower average prices over the week, both averaging around €100, due to stronger wind power generation and milder weather.
In the first days of week 15, prices across the major market are closely coupled again, in the range of €200-250 on average, due to lower wind output.
Continental power prices are expected to stay elevated in the short-term due to supply concerns and robust demand.
Gas prices remain a key driver in the power market and may decrease due to strong LNG imports to Europe over the last week and mild weather reducing power demand.
On the other hand, Russian flows reduced slightly at the Velke Kapusny entry point.
Short-term gas futures have remained stable at around €100 per MWh and the front month is trading at €103 per MWh at the time of writing.
The front-year has continued its increase and is now trading at €80 per MWh, up from €69 at the beginning of last week signaling that the market is expecting a tighter gas market in the longer term.
Coal spot and futures have continued their steady rise and are connected to the now confirmed ban on Russian coal imports to the EU and other tightening market fundamentals.
Specifically, the API2 front-year contract increased sharply in price since the beginning of last week, now trading at $234 per tonne, a 27% increase compared to 4 April.
This is signaling a tighter European coal market next year, which could result in higher power prices in European markets with higher dependency on coal.
Asia
The Japanese government has requested companies fill up LNG storage in preparation for an eventual supply disruption from Russia.
Power prices have eased from the highs in late March caused by supply disruption, the earthquake and cold weather that month, but remain high.
Furthermore, Japanese utilities will not sign new Russian coal contracts, after restrictions from the government.
Similar sentiments can be seen in South Korea, as in a recent tender from utility Korea Southern stated explicitly that coal from Russia is “not allowed”.
South Korea and Japan now shunning Russian coal will have impacts on their power sectors, as both are large importers of thermal coal, and coal previously sourced from Russia now has to be sourced from other markets.
In India, the average power purchase price on the country’s largest electricity exchange, the Indian Energy Exchange (IEX), surged in March to the highest level since April 2009, reflecting a steep rise in electricity demand.
A coal crisis is brewing in India for a second year running, following supply disruption in the wake of the Russia-Ukraine conflict.
At the end of March, coal stocks stood at only 9 days of consumption, compared to an average of 15 days last year.
A government press release stated that power generation in central generating stations has decreased production due to low coal stocks.
North America
Despite ongoing increases in commodity prices for coal and natural gas, power prices in US markets are continuing to decrease further from January and February.
Milder temperatures coming out of the winter combined with considerable renewable generation are both driving prices down.
