FBMC comment: Cross-border power capacity limits hit as supply margins tighten

Limitations to France’s electricity supply mix will help push French and German net flows to capacity limits during peak hours on Tuesday.

This trend is likely to continue for the rest of the week with the countries operating in the flow-based market coupling (FBMC) region facing a mix of hot weather, low renewable power output and thermal plant outages.

Beyond the day-ahead

Poor coal plant availability due to both scheduled and unscheduled maintenance, combined with low wind power production has supported Dutch power prices in recent weeks and resulted in a large Dutch premium compared to the other FBMC countries, especially Germany (see EDEM 15 June 2016).

And the fundamentals are unlikely to improve in the Netherlands during week 29, particularly with France facing squeezed supply margins this week, limiting its own export potential. This means Dutch power should continue to retain a high price premium and a strong demand for imports.

This could also mean that although the Netherlands should continue to import from Germany, there could be limits on available volume with France also likely to import from Germany.

However there could be constraints to the amount of available German export volume overall with wind output forecast to be around 2.5GW for most of the peak hours during week 29. High levels of German wind output are closer to 20GW.

With Germany, France and the Netherlands under pressure, Belgium is unlikely to be able to import or export large volume with its FBMC neighbours this week. Along the Belgian-French and Belgian-Dutch borders flows are likely to be balanced on most days. This pattern is expected to emerge on Tuesday, according to Joint Allocation Office (JAO) data published on Monday.

The day-ahead

Germany will be the most consistent net exporter of power on Tuesday with net flows hitting capacity limits for most of the peak hours, according to JAO data. Declining German wind power is a factor with generation forecast to be extremely low during peak hours – between 1.1GW and 2.3GW according to ICIS analyst forecasts.

Another factor is high demand for German exports from France. France will be a net importer for most of Tuesday and for all peak hours. Rising consumption, influenced by forecasts of above-average temperatures and subsequently increased air conditioning needs, has driven the spike in imports.

On top of this, thermal plant availability has been weakened in France in recent months following a series of planned and unplanned outages across the country’s nuclear fleet.

High French imports could be the norm during week 29 with temperatures predicted to remain high and the supply outlook unchanged. christopher.rene@icis.com