Strong upside risk emerges on Nordic power spot and near-curve

03 October 2016 05:15 Source:ICIS

Nordic wholesale power prices are set to increase on the back of booming continental European electricity prices and surging demand, according to one Oslo-based power analyst at a Norwegian utility.

Recent spikes in coal and gas prices, as well as French nuclear woes, have not yet been fully priced into the Nordic forward market and could lead to the inflation of prices in the spot market, he said.

And forecasts of dry weather and surging demand in week 40 were other imminent indicators of stronger spot prices which would see an increase in the Nordic countries’ reliance on power imports from Germany.

“October closed on Friday, and the market has not priced in the dry and cold weather that we are expecting in October,” said the analyst.

When prices increase in the Nordic day-ahead market, hydro producers generally ramp up production to profit. But unless there is increased stock infill, higher production means a drop in hydropower reserves.

While limiting spot price gains this would drive up near-curve prices and could narrow the price spread between the Nordics and continental Europe. At Friday’s close, Germany was priced around 13% higher on the October baseload product, the day of its expiry.

This is a fair decline in the premium from 19% on the September product at expiry, reflecting how the Nordic curve has chased Germany higher.


Above-average temperatures and dry weather sent the seasonal hydropower stock infill in week 38 down below the median for the years 1990-2015, according to data from the Nordic energy regulator.

Nordic stocks dropped from just under 80% to just under 79%, reducing potential power generation from 97TWh in week 37 to 95.7TWh in week 38.

However, strong rainfall and floods shook Norway in week 39, pulling down Nordic spot prices on day-ahead power exchange Nord Pool.

The Nordic day-ahead system price, a weighted average of the fifteen bidding zones including the Baltic countries, fell from €26.09/MWh for Tuesday delivery to €23.26/MWh for Friday delivery.

On the curve, however, strong upside on Nordic futures platform Nasdaq OMX came from bullish pressure in Continental Europe.

October ’16 settled at €25.95/MWh on Monday, and last settled up 6% at €28.30/MWh late on Friday afternoon, the last trading session before October expiry. October was priced 15% above September at expiry, while the German market’s period spread was less at 10%, again illustrating how the Nordic forward market has strengthened relative to Germany with winter approaching.

Nordic November, which takes over as front month from Monday, further illustrated this strengthening Nordic sentiment this week, heading into winter. It settled even firmer at €29.85/MWh, up 8% from Monday’s fix.


The average day-ahead price tallies with the analyst comments, and appears to indicate more upside potential on the Nordic day-ahead market.

The Nordic system price delivered in September just 2.6% higher than the futures contract at expiry.

But in Germany, the EPEX Spot average day-ahead close in September was a full 9% above ICIS’s monthly September product at expiry.

And the Nordic day-ahead average was a full 26% below the German equivalent.

This means the Nordic spot price has so far been held in check relative to Germany, but should increase considerably according to pricing signals on the forward curve.

As such the Nordics could become a greater importer of power from Germany during hours when cheap German wind power is the price driver.

“I think you can attribute most of the gains this week to rising coal prices and the French nuclear issues.” In fact, he said, humid weather this week had only dampened the price increase.

By Herman Moestue