Due to well-below-average temperatures across Europe, daily power prices in most major markets rose above 200 euros on Monday, as increased demand increased reliance on costly fossil-fuel plants.
With temperatures in the north of Sweden falling below -40 degrees Celsius, prices in the Nordic regions rose to the second-highest level on record on Monday, reaching 226.54 euros per megawatt-hour on Nord Pool. In order to maintain grid balance, an oil-fired reserve plant was also established in Sweden.
Prices in Poland increased by 69% to 240.59 euros, the highest level since the day-ahead auction for that market began on Nord Pool in February of this year. Prices in Germany rose to 265.39 euros and in France to 282.50 euros, both nearing earlier this autumn's highs.
With European carbon prices trading within 10 cents of a record above 80 euros per tonne set last week, and benchmark gas and coal prices elevated by low storage levels, generating electricity at fossil-fueled plants remain prohibitively expensive. It exposes the power market to extremely high prices during periods of cold and windless weather.
“European power prices are therefore expected to remain very high in December,” Andy Sommer, head of fundamental analysis & modeling at Axpo Solutions AG, said in an emailed note. “Weather in the coming weeks, France’s nuclear plant performance, Russia’s daily gas deliveries, and China’s coal policy, are all going to determine if prices rise even higher.”