Highlights from our Market Expert View Autumn Edition

CO2 prices derailing from gas, focusing on 2026 supply/demand fundamentals 

CO2 prices are on a marginally rising trend and are now less impacted by gas prices. The market is turning its attention to a tightening year-ahead supply/demand balance. Although a tighter balance is awaited, we still consider some factors to limit major price increases for the coming quarter.  

The combination of expected increased net inflow of renewables capacity and normal weather conditions will hold the prospects of the strongest year-on-year renewable electricity increase ever seen in EU27+UK. This comes at the same time as power consumption once again will go rather sideways. Several of the most power-intensive sectors are currently on a negative activity trend, which may be only slightly offset by power demand growth from emerging technologies. This will translate into strongly dropping thermal power generation, where fuel competitiveness can somewhat decide the magnitude of the drop.   

European gas prices stabilise - but risks remain 

European gas prices have stabilised in the low to mid-€30s since this spring amid comfortable fundamentals - high LNG imports and depressed consumption. We expect these conditions to persist, and we see a downside potential for prices. However, risks from winter weather and rising Ukraine imports should be monitored. Storage is likely to peak at the current 83% fullness, which is a comfortable level but may be less than ideal if we run into severe supply or demand disruptions. 

Continental Europe’s winter hydrology outlook: mild weather, uncertain precipitation, and next-generation AI forecasts 

Seasonal forecasts indicate warmer-than-normal temperatures across Europe this winter and a slightly increased likelihood of Dunkelflaute conditions in November, while outlooks for later in winter remain uncertain. Early winter is expected to bring drier-than-normal conditions to Central Europe, followed by more uncertain precipitation patterns later in the season. 
Snowfall forecasts show below-normal snowfall in the Alps early in winter, but a return to above-normal levels by January. 

Hydro production has been normal or below normal across much of continental Europe, but increases are expected in the coming weeks, particularly in the Alps and Southeast Europe, following exceptionally heavy rainfall, flooding, and record-early snowfall in the region. 

A key milestone this autumn is the launch of Insight by Volue’s new AI-based inflow models, showing an average 26% improvement in MAPE. Further enhancements are planned, including AI-based weather input and the use of a broader set of weather data points, laying the foundation for future AI-based hydro production models. 

German power market: thermal spreads turn positive  

The benchmark front-month power contract increased notably during the third quarter, while SRMC gas and coal remained flat. As a result, the margin for average gas-fired power plants turned positive for the first time since early this year. Higher-efficiency coal plants also returned to positive margins.  

Germany plans a major investment initiative to modernise infrastructure and still reach its 2045 climate neutrality target. This can support demand expectations for power and gas, but in reality, both power and gas show no signs of recovery given the weak industrial performance. Solar and wind generation continue to play an important role in the power mix and determine spot price levels. While wind has underperformed this year, solar has exceeded historical production levels by far. The price outlook for this winter is rather neutral when comparing Volue’s mid-term forecast with currently traded market prices. 

The switch to the 15-minute MTU in the Day-Ahead market 

From 30 September 2025, the Day-Ahead auction began clearing in 15-minute MTUs. Early results indicate a reversal in the typical price dynamics between the Day-Ahead and IDA1 markets. The Day-Ahead curve adopted the characteristic “sawtooth” pattern previously seen in IDA1, while the IDA1 curve became smoother. IDA1 volumes declined by around 39% compared to the September average, a trend also observed across most Continental European markets, except Italy, where volumes remained stable. Italian participants may be reluctant to shift liquidity away from the widely utilised IDA market. 

The sawtooth effect, marked by price peaks in the first quarter-hour and drops in the last, reflects mismatches between hourly generation forecasts and actual quarter-hourly production during ramp-up or ramp-down periods. 

Recognising these systematic patterns allows traders to reduce imbalance risks and enhance grid stability. Such dynamics are not limited to solar ramps but also emerge during thermal ramp-ups and wind fluctuations. 

Nordic power forward outlook and shorter time resolution 

As the Single Day-Ahead Coupling (SDAC) market transitions to 15-minute MTUs, power prices across the Nordics and Europe have become more dynamic. With increased variability comes a greater need for flexibility - from both producers and consumers. But what solutions will define this next phase of the energy transition: grid-scale batteries, hydrogen, automated demand response, emerging technologies, or a combination of them all? 

At the same time, contrasting hydrological conditions between northern and southern Scandinavia continue to shape market dynamics. This imbalance may change as we move into a season of higher consumption and rising prices, potentially strengthening or weakening price coupling between the geographies. Volue’s forecasts point to a spring where NO3 and NO5 may converge, while NO4 still faces challenges in lifting its hydro-driven price curves.  

Major grid bottlenecks in the Nordics 

The transition to flow-based market coupling in the Nordics enables us to study which grid elements contribute to price differences. Many bidding zone borders are still important (such as SE1-FI, DK2-SE4), but also internal bottlenecks within bidding zones play a big role, such as internal bottlenecks in SE2 and SE3, as well as Blåfalli-Mauranger and Aurland-Sogndal in Norway. We expect the newly commissioned Aurland-Sogndal upgrade to increase prices in NO3 and partly northern Sweden, while slightly reducing prices in southern Norway.  

Does the various Continental and Nordic power markets price in the potential heavy wind power increase next year?

We find it extremely important to follow the power balance for next year to find some answers for where the power markets will go. We face significant uncertainties in consumption, particularly regarding the future delivery of wind power generation next year. We have experienced very low delivery over the past 12 months, raising questions about where we will end up in 2026 and whether we will return to normal. If so, we might see the impact of new renewable energy on both gas and CO2 markets next year, as the need for thermal production is expected to fall significantly. As a consequence, we might see a significant decrease in delivery in the Continental power markets, which will also have a substantial impact on NP power prices. At Volue, we ask ourselves whether the mark-to-market concept is the best input at present, or if lower gas and DE power prices are more likely to yield lower price expectations in our NP area simulations.