FUNDAMENTALS: High hydro stocks push Swiss power Q3 ’19 below France

LONDON (ICIS)–Switzerland’s power Q3 ’19 contract dropped value to move at a discount to France in week 15, as abundant hydropower stocks and high scheduled nuclear availability continued to weigh on Swiss summer prices.

Although precipitation levels during the week have been low, the snowpack in the Swiss Alps is larger than usual, according to the Federal Office for the Environment. Because of this, the Swiss front quarter might be in a position to maintain its discount to France.

Hydro reservoirs were 23.7% full as of Monday, according to data from the Federal Office of Energy (BFE) released on Thursday. This was 14 percentage points higher than in 2018 and 8.4 points above the 20-year average, as well as the highest in 12 years.

The abundance of hydropower stocks drove the Q3 ’19 Baseload contract from a €0.05/MWh premium to France to a €0.10/MWh discount, despite the product jumping from €40.55/MWh on 2 April to €48.00/MWh on Thursday, according to ICIS over-the-counter trading data.

The rise in absolute price was largely in line with the movements in France and Germany, to which Switzerland is a net importer.

Switzerland remained at a premium on the French border for May ’19, a month during which the 365MW Beznau 1 nuclear reactor will undergo its annual maintenance period, while France should enjoy above-average nuclear availability.

The Swiss front month last traded at €41.40/MWh on Thursday, up €4.70/MWh week on week, while the increase in nuclear-rich France was more moderate. Influenced by France, Switzerland retained a discount to Germany.

The Swiss discount to Italy – a net importer on the border – remained firmly in double-digit figures for both the front month and front quarter.

The Beznau maintenance will reduce nuclear availability to 86% in May, down from 97% in April, maintenance schedules published on exchange EEX showed. A 100% nuclear availability should be achieved at the start of July.

Nuclear generation has met 34% of domestic production in 2013-2018 according to BFE, compared with hydro’s 60%.

The contribution of nuclear is usually lower during the third quarter, when hydropower availability is strong thanks to snowmelt in the second quarter. In 2013-2018 nuclear production in the third quarter was 29% of the total, while hydro made up 64%.