FR Baseload Power price (€/MWh)
FR Peak load Power price (€/MWh)
EUA price (€/t)
PEGN Gas price (€/MWh)
Coal Price ($/Tn)
Gas efficiency:52%; Coal efficiency: 38%
Gas vs. Coal Price (€/MWh)
Gas efficiency: 52%; Coal efficiency: 38%
Clean Spark Spread – Baseload (€/MWh)
Clean Spark Spread – Peak load (€/MWh)
Clean Dark Spread – Baseload (€/MWh)
Clean Dark Spread – Peak load (€/MWh)
Russian gas flows have been shut off in several European countries, coal is definitely back, and the recovery in China following the end of containment is driving oil prices.
Prompt and month-ahead contracts:
France is currently facing a drought due to a 20% deficit in rainfall between September and April, according to Météo France. As a reminder, whereas Europe experienced heavy rains during last summer, the heatwaves and drought of 2020 caused a loss of 3TWh of nuclear production as less cooling water for the nuclear fleet was available.
Due to corrosion issues encountered, EDF has adjusted its nuclear production estimate for 2022 to 280-300TWh from 295-315TWh. At this stage, and pending the completion of checks and repairs, its nuclear production forecast for 2023, i.e.,300-330TWh, has not been modified.
Over the past five years, France has been a net exporter of 15TWh on average during the summer months. However, France could become a net importer of electricity this summer for the first time in over two decades due to the low availability of nuclear and hydroelectric power, said Energy Quantified (EQ). Net imports could reach 1.5TWh in June, 2.1TWh in July and 2.2TWh in August, amounting to a total of 5.8TWh, according to EQ data.
In terms of demand, June saw consumption increase by an additional 1 GW at the max, mainly on the back of continued mild weather conditions.
As for generation, nuclear power output averaged 30.7GW at the max, up by 0.6GW m-o-m and down by 10.5GW when compared to the same month last year. In June, even though the French nuclear fleet had its pitfalls, a few days with higher-than-expected production levels have been observed. As for fossil-fueled production, gas generation was down by an average 0.5GW at the max, whereas coal power output was rather stable. Regarding renewables, no major changes were observed in terms of wind and solar generation. Hydro, however, was down by an average 1.8GW at the max.
Throughout the month, spot power prices continued to reflect the gas market´s behavior with significant volatility (with a standard deviation of c. EUR73.3/MWh).
After starting with an average of EUR187/MWh in the first week, spot electricity prices in Europe rose during the second week due to increased demand and rising temperatures. The French spot contract climbed to EUR194.05/MWh. This situation continued in a context of declining renewable energy production until the following week when spot power prices fell in a context of strong natural gas supply.
The middle of the month was marked by a very significant increase in spot prices supported by rising gas prices, strengthening demand and declining peak solar production. On Friday June 17th, the French spot contract climbed by 11.3% to EUR303.54/MWh (+27% to EUR255.43/MWh for the German spot).
The situation continued to deteriorate in a context of low production of renewable energies and restricted supply due to the interruption of gas supplies from Russia. Between June 20th and 21st, the spot price of electricity in France rose by 26.4% to EUR354.03/MWh. The persistent corrosion issues of the French nuclear reactors pushed the spot price up to EUR383.14/MWh on June 22nd, with an average over the last two weeks of the month ofEUR327.43/MWh. As a result, the power spot contract added on average EUR50,97/MWh m-o-m.
Gazprom’s announcement on June 14th that gas supplies to Germany would be cut by 40% triggered an explosion in gas prices across Europe, which until that moment had remained quite stable compared to May. Prices rose from EUR80.81/MWh to EUR96.18/MWh d-o-d, only to increase further to EUR114.64/MWh on June 16th. Since that date, tensions continued in the market with gas prices during the last 15 days of June averaging EUR124.96MWh.
During the first 20 days of June, European coal spot prices remained stable compared to the previous month, at around USD325/Tn. However, on June 21st, prices rose by 6% (USD20/Tn), an increase which was observed once again on June 28th, reaching an average price of USD367/Tn at the end of the month.
On the other hand, Brent contract for delivery in August, although still at very high prices, suffered a slight decrease and a change in trend during the second half of June, moving from values of more than USD 120/bbl to values of around USD114/bbl.
In this tense context, many countries in Europe, including France, Germany and the Netherlands, had already begun to bring back the production of coal-fired power plants.
Earlier in the month, Germany’s government approved the usage of a reserve of c.10.4GW of coal, lignite and oil-fired power plants to cover for a possible gas shortage. Such reserve should be used as soon as possible to reduce gas consumption in electricity production, German Minister of Economic Affairs Robert Habeck said: “We are setting up a demand reserve. And I can already say that we will trigger the reserve as soon as the law comes into force.” Power plant operators should already be taking the necessary steps to prepare for the return to the market of their inactive or mothballed coal units, he added.
The Netherlands followed suit by announcing on Monday, June 20th, the lifting of restrictions on coal-fired power generation to compensate for a drop in gas supplies from Russia. This means that coal-fired power plants can once again operate at full capacity instead of the maximum of 35% previously agreed.
For its part, France will reopen Émile Huchet 6 coal-fired power plant this winter to avoid a possible shortage of electricity in the context of the war in Ukraine and low nuclear and hydroelectric availability, the Ministry of Energy Transition said.
Medium and long-term contracts:
At the beginning of the month, Cal23 electricity contract prices in France and Germany rose to EUR307.53/MWh and EUR241.23/MWh respectively, influenced by the strength of coal markets. This situation continued throughout the beginning of the month.
During the second week, electricity prices (FRA and GER) for delivery next year started to diverge amid conflicting signals. On Monday, June 6th, the German Cal23 contract fell by 0.4% to EUR247.40/MWh, while its equivalent contract in France settled at EUR314.24/MWh, adding 0.3% d-o-d. However, this price increase was short-lived as Cal23 contract in France declined over several days, driven by lower gas and coal prices, to EUR288.01/MWh.
At the end of the month, long-term prices fluctuated in an upward trend to reach new highs due to the intensification of fears that Gazprom would completely stop gas deliveries via the Nord Stream 1 pipeline. The French Cal23 product closed the month at EUR365.67/MWh. As a result, FRA Cal23 power baseload contract added on average EUR15.8/MWh m-o-m whereas its equivalent Cal24 was down by an average EUR6.86/MWh.
French Q422 baseload contract, which started off the month at EUR485.5/MWh, increased steadily, reaching a record high of EUR790/MWh on June 30th, and adding on average EUR100.18/MWh. Note that its equivalent peakload contract crossed the EUR1500/MWh mark.
It is in this context that the heads of three major French energy companies (TotalEnergies, EDF and Engie) have together urged French people to “immediately” reduce their consumption of oil, electricity, and gas in light of the risk of power shortages and soaring prices that threaten “social cohesion” this coming winter.
The only good news of the month is related to the Flamanville EPR, which has no corrosion problems according to a statement released by EDF: “We are confident about the operation of these circuits as they have been made” on the 1.6 GW European Pressurized Reactor (EPR). The asset is expected to start operations at the end of next year.
On the gas front, the EU, which has reached an agreement on an oil embargo against Russia – likely to reduce its Russian oil imports by c.90% by the end of the year –, has seen Gazprom taking the lead when imposing any kind of restrictions.
Mid-month, Gazprom reduced its gas exports via the Nord Stream 1 pipeline – which runs through the Baltic Sea and is the main source of gas for Germany – by 40%.
A few days later, Italy suffered a 15% reduction in its imports of Russian gas before Gazprom announced that it would supply less gas to Austria from June 17th. As for France, the gas transmission system operator GRTgaz announced that it has not received Russian gas by pipeline since June 15th, with “the interruption of the physical flow between France and Germany”. However, France imports gas from other countries, including Spain, which has recently increased its deliveries. Most importantly, France has increased its purchases of LNG. A flurry of cargoes has resulted in LNG terminals nearing their maximum capacity, according to GRTgaz.
The French gas operator is confident gas reserves will be filled for this coming winter. At present, stocks stand at 56% of capacity, up by c. 6% when compared to previous years.
Though a period of calm had been observed in the markets since May, the price of gas for delivery in 2023 has jumped in June. Such increase is also driven by a sudden slowdown in the supply of LNG originating in the United States, as a fire has put the Freeport LNG terminal near Houston, Texas, out of service for 90 days.
Gazprom’s announcement that it would reduce gas flows to Germany by more than 60 million cubic meters has not only affected prices in the short term but also in the long term. We have been witnessing new records in the energy markets: the MWh of gas for delivery in 2023 has exceeded 100/MWh (EUR106.70/MWh). As for electricity, prices for next year also reached new heights while prices for 2024 and 2025 were still relatively stable.
By COB of June 30th, TTF Cal23 contract had averaged EUR89.11/MWh, adding c. EUR10 /MWh m-o-m. Again, at the end of the month, the operator of the Nord Stream 1 gas pipeline said that it would stop the two lines carrying Russian gas to Germany for 11 days in July due to some planned maintenance. This shutdown has Europe trembling, and it would be of no surprise that, once finished, Russia announced that gas supplies cannot be reactivated. In order to deal with this uncertainty, all European countries are looking for new sources of gas supply and are committed to reaching a high level of gas storage to face this coming winter season. Although Germany is directly involved, the Spanish government has already said that “If the war is prolonged over time, all Europeans will have to show solidarity, be responsible and be aware that the price we can pay for defending our values is one thing but doing nothing and allowing Putin to continue with his imperialist drift could be much worse in the long run”.
As for the diversification of gas suppliers, the EU has signed an agreement with Israel and Egypt on June 15th in Cairo to transport natural gas from Israel to Europe via the Arab country, where it is to be liquefied. The agreement is valid for three years.
According to oil market analysts, oil prices will remain high due to supply shortages: loss of crude imports from Russia, fears that OPEC will not be able to meet its quotas and the fall in investment in the sector in recent years. This is compounded by demand problems resulting from Covid related restrictions being lifted in China and the driving season in the USA.
The new sanctions imposed by the United States on Iran provided additional upward support. Towards the end of the month, oil prices had risen on three consecutive days, as major exporters – Saudi Arabia and the United Arab Emirates – appeared unlikely to be able to significantly increase supply. On the other hand, Western countries have agreed to study potential measures to regulate the price of Russian crude. As a result, Brent crude oil rose by 2.5% to close at USD117.98/bbl.
On the emissions front, EU Member States agreed on June 29th to increase their climate ambition goal and thus reduce CO2 emissions by 55% by 2030, compared to 1990 levels. This agreement is key for major industries to be able to adapt to the energy transition in the short and medium term. Moreover, the implementation of the Emissions Trading Scheme (ETS) and the Carbon Border Adjustment Mechanism (CBAM) are essential to support companies’ investments with effective measures against carbon leakage, especially with soaring energy prices, high inflation, increasing carbon prices – +700% in the last four years – and scarcity of raw materials making this challenge greater than ever. In this context, emissions prices averaged c. EUR83/Tn up to the day of the agreement, and since then have risen to c. EUR90/Tn, thus absorbing the interest in reducing emissions.