Electricity cross-border flows: supply squeezes shift from south to west

The middle of the third quarter saw demand pressure alleviate across south-eastern European power grids amid an easing of temperatures, while weaker industrial activity during the peak holiday season also weighed on power consumption. On the supply-side several power plants returned to the grid following planned maintenance which widened supply margins. However, while south-eastern Europe recovered from the summer stresses, parts of western Europe displayed increased supply risk ahead of the winter months.

Southern pressure unwinds

Flows of electricity generally moved towards south-eastern Europe in August but there was a marked drop in demand month-on-month as cooler weather greeted the region.

For the third month in a row the largest monthly swing among Europe’s net importers was Italy but unlike the previous months, net inbound flows dropped as supply margins improved. Net exports were 3.1GW/hour, a monthly drop of 44%.

Italian spot prices descended from three-year lows as demand subsided on the back of easing temperatures. August is also peak holiday season which limited consumption. There remained some pressure on supply with hydroelectricity output below last year levels and more gas-fired generation drafted in but prices still recorded sharp falls. The Italian Day-ahead Baseload averaged €53.27/MWh, a monthly fall of 27%.

Similar changes occurred in Hungary with margins more comfortable as temperatures cooled and nuclear units returned from maintenance, but some supply risk lingered amid low reservoir stocks in the Balkans. However net inbound flows dropped 20% month on month to 1.6GW/hour while average Day-ahead Baseload prices shed 16% to €45.80/MWh.

In contrast the exchange of power between the UK and its neighbours was unchanged month on month with average net inbound flows at 2.8GW/hour in August. The country’s importing potential was slightly hindered in September with the 1GW BritNed pipeline offline 14-16 September and will be further restricted next month when the 2GW IFA interconnector has its nameplate capacity reduced by 50% from 5 to 6 October.

Supply squeeze shifts west

As the pressure in southern Europe subsided fresh supply concerns surfaced in pockets of western Europe. This triggered monthly flow increases among Europe’s largest net exporters as they looked to fill in the shortfalls.

Belgium, Switzerland and the Netherlands all drew in greater volumes of power in August which increased the strain on France’s eastern border and Germany’s western border.

Unplanned coal plant outages squeezed supply in the Netherlands which had to turn to more expensive gas-fired generation to maintain grid balance. Ongoing outages at Belgian nuclear plants have seen an uptick in Dutch imports and in turn the Netherlands has relied more heavily on German imports.

Without a fully functioning nuclear fleet Belgium also continues to absorb more power than France. The prolonged outages of the 1GW nuclear reactors Tihange 2 and Doel 3 since March 2014 and uncertainty regarding the availability of the 433MW nuclear reactors Doel 1 and 2 should ensure the flow of power moves towards Belgium in the near term. And harsh winter conditions would accentuate the problem. However Belgian grid operator Elia has moved to calm fears by suggesting that energy security for this winter looks strong.

Meanwhile Switzerland drew in greater volume of power from both France and Germany in August with hydroelectricity stocks below last year’s levels, while at one point 70% of Switzerland’s 3.3GW nuclear energy installed capacity was off line for planned maintenance. Nuclear energy accounts for 36% of the country’s electricity needs. christopher.rene@icis.com