As Winter Turns to Spring, What’s in Store for the Energy Markets?

March saw the successful delivery of Volue’s latest Market Expert View webinars. Held over two days, attendees received a fuels updates, before hearing about activity in the Nordic region and an outlook for the wider European Market. For those unable to attend, we’ve provided an overview of some of the key talking points below.

19. Apr. 2023

#1 Reduced nuclear power consumption continues

This year has seen significant changes in the European power balance compared to 2022. One of the most noticeable changes is the decline in consumption and performance in nuclear power production in recent months. The downward trend in thermal production from sources like lignite, coal, and gas is also expected to continue at full speed throughout the rest of the year. This is due to the strong reduction in consumption, as well as a significant increase in wind and solar production.

Tor Reier Lilleholt, Head of Analysis, Volue

#2 Gas appears stable for the Summer

European gas prices are expected to remain flat for much of the summer season and healthy storage levels mean there’s less need for an injection ahead of next winter. However, prices have already fallen to levels where coal to gas switching becomes a factor, and this will support gas demand. As the year progresses, there is also some potential for prices to rise as demand is predicted to recover in both Europe and Asia.

Bjørn Inge Vik, Senior Analyst, Volue

#3 Large drops in the Carbon Markets

We expect emissions in the EU ETS market to fall considerably in 2023. This is largely due to the persistent decline in power consumption, which has reduced the reliance on thermal power sources. We also identify the possibility of higher gas shares in thermal power than earlier envisioned. As a result of these factors, we predict that CO2 prices will gradually decline over the course of the year.

Espen Andreassen, Senior Analyst, Volue.

#4 Low hydro and nuclear impacting European prices

Continental power is currently highly dominated by cheap gas and a reduction of consumption that has impacted each member state to varying degrees. However, as we look towards the upcoming summer and winter seasons, there are two significant concerns on the horizon: Firstly, there is a deficit in hydro balance in the Alpine region, which could reach around -15 TWh. Secondly, there is uncertainty surrounding the condition of the French nuclear fleet following an announcement by ASN on March 6th about a new corrosion issue affecting Penly 1 and potentially other reactors. This coming summer, as with 2022, certain areas like Northern Italy or the South of France might be characterized by severe draught. This will not only impact hydro power generation, but also thermal and nuclear output.

Silvia Messa, Senior Market Analyst, Volue

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