Weak French nuclear drives CWE price divergence but coupling more likely in August

A drop in French nuclear availability and stronger German renewable power generation contributed to an increased price spread on the spot power exchanges of markets in the centralwest Europe (CWE) region in July compared to June, latest figures show.

However, French demand is expected to be particularly low in the first half of August. This should cancel out the impact of weak nuclear availability which is scheduled to rebound by mid-month.

Falling natural gas prices may also reduce the Dutch premium, while Belgium will return to full nuclear availability on 8 August.

Contrast

The price difference in July was particularly notable between the French and German markets, which on average settled at a spread of €0.30/MWh in June, with the French equivalent carrying a discount on almost half the days of the month.

By contrast, there was no French discount in July and the spread stood at €2.84/MWh on average.

The Belgian and Dutch premiums to Germany increased by €1.03/MWh and €0.84/MWh on average, despite higher plant availability compared to the previous month.

The increased spreads were partly due to improved German wind power, which increased from 3.64TWh in June to 5.03TWh in July, according to research institute Fraunhofer, though this was still down compared to the previous summer.

The increase was particularly evident early in the month. German wind power was being forecast on a day-ahead basis at around 20GW on 6 July when the Dutch daily premium spiked to €21.08/MWh while the Belgian and French equivalents held their highest spreads to Germany of the month, both above €10.00/MWh.

French nuclear availability had previously been scheduled to reach its highest point for the summer during this period, but changes to the maintenance schedule meant that expectations gradually dropped from 56GW to 44GW.

Weak availability in the second half of the month had been anticipated but was also revised downward, falling to 38GW to 20 July.

Heat-wave

This made the French power system vulnerable to higher temperatures, which reached 3°C above average in week 29, more than doubling the rate of gas-fired generation required during peak hours from around 2GW earlier in the month to 5GW.

The Dutch premium was also higher in this period despite plant availability progressively improving throughout the month. Non-availability fell from 6.8GW on 1 July to 3.7GW on 25 July, according to data from grid operator TenneT.

The German day-ahead baseload price, including weekend deliveries, settled at €27.27/MWh on average in July, down from €27.69 in June.

The increase in renewables was largely offset by firm coal prices. The CIF ARA 2017 contract was up by 7% by the end of the month and had gained 23% over both June and July.

Natural gas prices were also surprisingly stable throughout the month, despite Brent crude dropping from over $50.00/bbl to around $43.00/bbl, partly explaining the persistently high Dutch premium. The TTF Year 2017 contract had actually edged above €17.00/MWh by 21 July but eventually fell to €16.275/MWh, putting the contract slightly lower than at the start of the month.

Carbon was the only part of the fossil fuels complex that had not recovered from the 23 June Brexit vote in the UK and continued to fall in July. The December ’16 benchmark contract fell from €4.62 per tonne CO2 equivalent (tCO2e) to €4.43/tCO2e. joachim.moxon@icis.com