FR Baseload Power price (€/MWh)

FR Peak load Power price (€/MWh)

EUA price (€/t)

PEGN Gas price (€/MWh)

Coal Price ($/Tn)

Gas vs. Coal Price (€/MWh)

Clean Spark Spread – Baseload (€/MWh)

Clean Spark Spread – Peak load (€/MWh)

Clean Dark Spread – Baseload (€/MWh)

Clean Dark Spread – Peak load (€/MWh)

May 2021

Market Analysis

Prompt and month-ahead contracts:

FRA electricity demand averaged 51.6GW at the max during the month of May, down by an average of c. 7GW m-o-m. Average temperatures continued to be lower than those observed during the same month last year, maintaining again the decreasing pattern observed since the beginning of 2021.

On the power supply side, the overall output level was stable to higher when compared to the previous month. Nuclear power generation averaged 38.4GW at the max, very much the same as in April. In terms of renewables, hydro output was up by an average 1.7GW on the back of heavy rainfalls during wks 19 and 20. Wind power production was up by an average 1.3GW at the max, whereas solar was slightly down, by an average 0.4GW at the max For its part, gas power generation was the only exception to the rule, showing average values decrease by 2.3GW at the max on the back of increasing gas and emissions prices.

As for gas prices, TTF spot contract continued the bullish trend observed during the previous, though to a much higher extend. The contract, which closed at EUR24.821/MWh on Powernext on Mon, May 31st, added an average EUR4.743 after reaching a multi-year high – not seen since Sep’18 – of EUR27.285/MWh on Mon, May 17th. Among the various factors aiding this upward trend we could mention: 1) rather low temperatures; 2) supply tightness, with NOR having started its maintenance season, LNG imports on the down with China absorbing a good amount of LNG cargoes, and continued low storage levels and, 3) emissions prices reaching record-high values.

With regards to FRA spot power prices, and unlike pattern observed in April, these were significantly lower, with FRA power baseload contract losing on average EUR7.83 after closing at EUR66.66/MWh on the EEX on Mon, May 31st. Overall lower demand levels and higher renewable output, especially in GER, which in turn resulted in some days showing negative hourly prices, both in FRA and neighbouring countries, managed to significantly offset the impact of rising gas and emissions prices. For its part, FRA peak load contract closed at EUR65.77/MWh, down by an average of EUR9.82 m-o-m.

Re. month-ahead contracts, FRA Jun’21 power baseload followed the bullish pattern we saw in May, adding an average EUR7.95 m-o-m after closing at EUR62.67/MWh on the EEX on Mon, May 31st. The contract was very much influenced by high gas prices on the prompt front, to which we should add RUS´s Gazprom failing to seek extra transit capacity to the EU for the month in question. and extreme bullishness in the emissions market. Its equivalent Jul’21 contract closed at EUR67.70/MWh, up by EUR9.53 m-o-m.

Medium and long-term contracts:

FRA power curve saw prices increase dramatically, mainly supported by a continued gas supply tightness and, more significantly, by increasing emissions prices. FRA Cal22 power baseload contract added an average EUR7.23 m-o-m and closed at EUR63.99/MWh on the EEX on Mon, May 31st after having settled at a 12-year high of EUR68.90/MWh on Fri, May 14th. Its equivalent Cal23 contract closed at EUR57.45/MWh, up by an average EUR4.67 m-o-m. As for quarterly contracts, FRA Q321 power baseload contract added a significant EUR8.66 m-o-m after closing at EUR66.74/MWh, whereas its equivalent Q421 contract closed at EUR80.95/MWh, up by EUR10.45.

In terms of underlying fuel costs, TTF Cal22 gas contract added EUR2.610 m-o-m after closing at EUR20.740/MWh on Powernext on Mon, May 31st. Ongoing gas supply concerns, increasing oil prices (with Brent Jul21 delivery contract adding an average $3.42 m-o-m after closing at $69.63/bbl on the ICE on Fri, May 28th), strong LNG prices in the Asian-Pacific region and, finally, very strong emissions prices.

As for coal prices, API2 Cal22 contract was even stronger than in our previous analysis, adding an average $3.16 m-o-m after closing at $80.85/Tn on the ICE on Fri, May 28th. Bullish gas prices, emissions prices reaching new highs, increased demand for coal by China and supply disruptions at Cerrejón (Colombia), amongst others, all added to this upward trend.

Finally, re. emission prices, EUA Dec21 contract continued its bullish trend, adding a total average of EUR6.93 m-o-m after closing at EUR51.69/Tn on the EEX on Mon, May 31st and not before having reached a new all-time settlement high of EUR56.65 on Fri, May 14th. Speculative trading, increasing gas prices and harsher climate goals set by the German government were namely behind this upward trend. However, the launch of the first UK ETS auction on Wed, May 19th (with 83 UKAs to be sold in 2021) managed to put some downward pressure on EUAs. In fact, parallel to the UKAs auction, nearly 75m EUA Dec21 contracts were traded on the ICE. The first UK auction, which was heavily oversubscribed, sold over 6m UKAs at a final price of GPB43.99/Tn. Note that, on May 26th, the UK government finished issuing free UKAs (a total of 39m) to industrial installations as part of the first year of its ETS. Looking ahead, we recommend keeping an eye on the UK ETS as it will likely influence the behaviour of the EU ETS, and vice versa.

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