More negative German intra-day power prices likely in May

Germany’s intra-day power prices will remain relatively stable in the near term, according to ICIS forecasts, but the likelihood of very negative prices will probably increase after the first week of May when several nuclear units are due to return from maintenance.

Intra-day prices have not dropped to as sharply negative values in April as they did in March, results of EPEX SPOT 15-minute German intra-day auction show.

The lowest auction result so far this month was-€4.24/MWh for 17:00-17:15 Berlin time on Sunday, 3 April.

In March, prices dropped to -€47.06/MWh in the afternoon of Easter Monday, pressured by solar power output, which usually peaks around midday.

A year ago in April 2015, prices dropped below -€10.00/MWh several times, including to -€99.94/MWh on a Sunday afternoon.

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Price support

Since 8 April this year, German spot prices have obtained support from three nuclear reactors being down for maintenance. This has removed about 4GW – more than a third of Germany’s nuclear capacity – from the market.

Other factors have also supported intra-day prices in April. “Weather has been almost the same the whole period – pretty predictable,” a trader at a European energy company said. Predictable wind and solar power levels mean renewable energy producers have less generation excess or shortfall after day-ahead deals have been concluded, ensuring fewer supply and demand spikes on the intra-day market.

Relatively cold weather, which is holding up power demand for heating in the region, has also helped prevent extreme price lows.

Less volatility

Intra-day prices this month have also not reached levels as high as they did in April 2015, despite more nuclear capacity being available a year ago.

The highest 15-minute auction result so far this month has been €64.51/MWh, for the 21:00-21:15 slot on Monday, 18 April.

In April 2015, prices reached above €70.00/MWh on several occasions.

Lower spikes this April are in line with the general downward trend of German power prices, caused by growing renewables capacity and bearish fuels.

Market adapts

But more stable intra-day prices also indicate the German market has become better at adapting to wind and solar power volatility, traders said.

“The market is becoming more mature,” a trader at a German renewable energy company said.

Producers have become better at forecasting their output and at acting quickly to price signals. This has reduced the need for balancing energy and made balancing prices less volatile, leading to less volatility of intra-day prices, he said.

May outlook

The nuclear reactors returning online in May, along with upcoming public holidays, increases the likelihood of negative price extremes, though their occurrence will primarily depend on renewables output, traders said.

The first of the three reactors down for maintenance is due to return online on 9 May.

Germany will have three national holidays next month. On the first of them, 1 May, prices are likely to be negative for one 15-minute slot, according to a forecast of EPEX SPOT intra-day auction results published by ICIS analysts. The slot will occur late in the afternoon, with combined wind and solar power around 14GW, and it will be priced -€4.67/MWh, according to ICIS renewables and intra-day forecasts.

Cross-border flows

In May 2015, prices went to negative on many occasions, with -€19.80/MWh the lowest result.

Because the market is better adapted to renewables than a year ago, the likelihood of negative intra-day prices is lower than in May 2015, the second trader said.

The outlook depends on Germany’s ability to export power during hours of high renewables output, traders said.

Germany’s cross-border capacity is harder to predict since flow-based market coupling, a more efficient way of allocating transmission capacity in centralwestern Europe, went live in May 2015, according to market participants. laura.raus@icis.com

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