Three Power Market Trends to Watch Out For in 2023
#1 Dropping carbon prices
EU lawmakers have come far in agreeing on a measure for auctioning large EUA supply volumes in the EU ETS market over the next couple of years in order to raise cash to fund renewables. The increased awareness of the new measure is likely to affect EUA prices in 2023.
At the same time, we are looking at power demand dropping slightly from the already weak 2022 levels. This will likely go on well into 2023, reducing dependency on thermal power generation and leading to declining emissions. We expect carbon prices to drop moderately from the 70-80 €/t range seen lately.
#2 Weak power consumption
The energy crisis has shocked Europe, but it is only since October we have seen a significant drop in power demand. This has happened all over Europe, and while the lion’s share of the decrease is probably mainly due to harmed industrial activity, we also expect power-saving measures in residential sectors to be triggered.
The economic outlook by recognized forecasting organisations has been strongly adjusted down. High energy costs and expensive raw materials are likely to burden the most power-intensive sectors also in 2023, and we predict power consumption to remain weak.
#3 Slow renewables development
Our projections for the renewable capacity pipeline in EU-27 are rather unaffected by the ‘REpowerEU’ measure for accelerating renewables growth.
We expect a marginally higher PV capacity inflow over 2023 compared to the last couple of years and an almost unchanged wind power increase.
Solar and wind power have, over the last couple of years, struggled with higher prices of components, and we see financing costs rising.
It frequently happens that renewables tenders for various countries are undersubscribed, and wind power orders are failing to accelerate.