German June power price drop linked to flow-based coupling results

A sharp drop in the German front-month June ’15 contract was linked to a lower than expected Day-ahead auction outturn, which took place for the first time under the flow-based market coupling method in the Central West European market area on Wednesday.

Traders analysed the first Day-ahead outturn under the flow-based market coupling methodology in the power markets of Germany/Austria, France, Belgium, the Netherlands and Luxembourg.

While some traders said it was too early to draw conclusions others saw a clear connection between the Day-ahead result and a €0.50/MWh drop intra-day in the German June ’15 Baseload during the afternoon, which took the contract to trade at €29.10/MWh, according to broker data.

This came after the spread between the lower-priced German and the higher-priced French Day-ahead contracts actually widened compared to the previous day. The expectation was that the flow-based coupling methodology would lead to a narrowing of price differences between markets. “The auction results showed that the Germany [price] did not come out as high after all,” one trader said in reference to the expectation that the German Day-ahead would rise and tighten the difference to the French peer.

The German Thursday Baseload outturned at €33.99/MWh, which is €0.78/MWh lower than Wednesday delivery on the EPEX SPOT exchange. This compared to a €0.17/MWh drop in the French Day-ahead to €35.34/MWh.

The auction results also show that there are still some grid bottlenecks between Germany/Austria and France as the prices during peak hours deviated from each other as much as €7.01/MWh, one trader said.

On the other hand, the Dutch and Belgian Day-ahead contracts dropped €1.70/MWh and €1.51/MWh to €37.89/MWh and €37.56/MWh. It was expected that these countries would see their prompt prices weaken to bring them in line with the German and French contracts, at least during this time of the year. martin.degen@icis.com