SP Baseload Power price (€/MWh)

SP Peak load Power price (€/MWh)

EUA price (€/t)

MIBGas 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)

June 2022

Market Analysis

Spot and short-term contracts:

On June 14th, the long-awaited gas cap that would lower prices on Wednesday 15th June was finally applied. However, this implementation coincided with a heat wave that affected the whole of Europe. This, together with a lack of wind, led Spanish CCGTs to reach the highest proportion of the country’s generation mix (not seen since August 2019). This resulted in a disappointing increase of the pool price (with an estimated compensation price that was also high).

Daily electricity demand averaged 710,2 GWh in June, up by 8 percentage points m-o-m. This increase was mainly due to the above-mentioned heat wave from the 14th to the 18th, where demand values exceeded the 800 GWh mark.

On the generation side, CCGTs have increased their share in the generation mix by more than 40 percentage points, rising from 17% to last month to 28% this June. Nuclear power and coal have also increased, albeit to a lesser extent. On the other hand, renewable energies, such as wind, hydro and photovoltaic, have fallen by 5, 4 and 2 points to 16, 5 and 14%, respectively.

Wind power production decreased from 4.6 TWh to 3.6 TWh m-o-m, down by a total 1000 GWh in June and with only one day above the 200 GWh mark. Thus, the share of renewable versus non-renewable energy generation has changed considerably compared to the previous month (50%-50%), reaching approximately 40% and 60%.

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. The price rose from c. 75 €/MWh to more than 103 €/MWh d-o-d.  Since that date, tensions continued in the market and the average of the last 15 days of June was 114 €/MWh. On the other hand, a fire at the Freeport terminal – one of the largest LNG terminals in the US – on June 9th, has left the plant completely shut down and has also impacted European gas prices. That very day, gas prices at the Iberian Gas Market (MIBGAS)shot up by 12%, moving from 71.25 €/MWh to 80 €/MWh in a single day.

In the first 20 days of June, Coal ARA CIF spot prices remained stable compared to the previous month, at around 325 USD/Tn. However, on June 21st, prices rose by 6% (20 USD/Tn), an increase which was observed once again on June 28th, reaching an average price of 367 USD/Tn at the end of the month.

On the other hand, Brent, 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 120 USD/bbl to values of around 114 USD/bbl.

In the news, since the gas cap for the electricity market was introduced until June 24th, the difference between the pool + compensation and the price without application of the mechanism was only around 12 €/MWh up until June 24th, while the improvement was expected to be around 100 €/MWh. From that day onwards, though, the difference had already risen above 50 €/MWh, reaching 97 €/MWh on June 28th. Nevertheless, we have not yet seen the expected prices in the market (around 120 €/MWh) and, given the latest news from Russia, which intends to limit its gas exports to Europe, it is not expected that they will be reached until Q2 2023 at least.

Medium- and long-term contracts:

On June 29th, EU Member States agreed to increase their climate ambition goal and thus reduce CO2 emissions by 55% by 2030, compared to s1990 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, soaring carbon prices – +700% in the last four years – and scarcity of raw materials making this challenge greater than ever. In this context, emissions prices up to the day of the agreement averaged €83/Tn, and since then have risen to €88/Tn, thus absorbing the interest in reducing emissions.

The Spanish electricity price for 2023 (OMIP Cal23 baseload contract) absorbed the disappointment of the implementation of the gas cap. Prices, which had been around 155 €/MWh for next year, rose on average by more than 20 €/MWh, reaching an average price of 175 €/MWh in the last 15 days of the month. Furthermore, this trend is strongly linked to Russia´s announcement to limit gas exports to Europe in the short and long term.

Gazprom’s announcement that it would reduce gas flows by more than 60 million cubic metres to Germany not only affected prices in the short term but also in the long term. As of this day, the price for 2023 (MIBGas Cal23) rose to 87 €/MWh, up by an average 17 €/MWh m-o-m. Again, at the end of the month, the operator of the Nord Stream gas pipeline said that it would stop the two lines carrying Russian gas to Germany through the Baltic Sea for 11 days in July due to some planned maintenance. This shutdown has Europe trembling, and it would be of no surprise that at the end of the shutdown 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 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 signed an agreement with Israel and Egypt on 15 June 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. Spain, for its part, is starting negotiations with Nigeria to source additional supplies. In recent months, the main supplier of gas to Spain has been the USA, ousting Algeria from this position. The latter is a country with which political tensions continue but, according to top managers of the major gas suppliers in Spain, there is no fear of supply cuts. Current contracts with Algeria are long-term (10 years) and remain in force. Although supply will continue, these tensions have affected prices. Prices are currently being negotiated for the next 2 years and are expected to increase for Spain as a result of these tensions.

On the other hand, to date, Spain’s natural gas storage capacity currently stands at 72% and is at a very good pace to reach the 80% target set by the EC for next October in order to face the winter.

In the news, Spain and Morocco have reopened the Maghreb-Europe gas pipeline, but in the opposite direction to that known until now. June 28th, 2022 will go down in Spanish energy history as the first day on which the Spanish gas network began exporting gas to Morocco.

According to oil market analysts, oil prices will remain high due to supply shortages: loss of crude 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.

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Profesional Experience

Céline, a young and dynamic person, had a first experience in the tourism sector as a community manager at Loups du Gévaudan, in Lozère. She joined HES team in November 2021 to diversify her knowledge: learning about the energy sector, specialising in marketing strategies in order to improve the company’s customer relations and, at the same time, developing her skills in coordination and project management.

Education

Céline graduated in Spanish and English Language, Literature and Civilisation at La Sorbonne IV (2018). She also holds a master’s degree II in cultural projects and establishments management, with a special focus on international tourism. She also studied abroad at the University of London (England) and Universidad de Morón (Argentina).

Céline Haya Sauvage

Marketing Responsible

DSC_0323

“Decarbonization of the Energy and Transport sectors is arguably today’s main economic driver for the industry.”

Profesional Experience

His career started in civil engineering as a Project Manager in France, Martinique and Australia. Afterwards, he became the General Manager of a subsidiary in Venezuela. In 1992, he established Dalkia in Germany (district heating, cogeneration, and partnerships) and represented Véolia in Thailand. In 2000, he opened the commercial office of Endesa in France to take advantage of the liberalized retail market. From 2006, as a development Manager at Endesa France, he led Endesa’s plan for Combined Cycle generation in France and developed the wind and PV portfolio of Snet at the same time. Philippe Boulanger worked for 3 years at E.ON’s headquarters coordinating the company´s activities in France. He was strongly involved in the French hydro concession renewal project. As a Senior Vice President – Project Director at Solvay Energy Services from April 2012 to February 2014 he was in charge of the H2/Power to gas and European direct market access deployment projects. Philippe has been an HES expert since 2014.

Education

Philippe Boulanger holds engineering degrees both from the Ecole Polytechnique and the Ecole Nationale des Ponts & Chaussées (France) and has a combined experience of more than 25 years in energy and infrastructure. In addition to English, Mr. Boulanger is fluent in French, German & Spanish.

Philippe Boulanger

Electricity Expert

HES-Philippe-Boulanger

“The world is changing. New investors pay particular attention to the energy sector while historical actors adapt their position to the market.”

Profesional Experience

Antonio started his career in the electricity sector in 1991 working as a member of staff for the General Manager of Sevillana de Electricidad (Spain). In 1997, he was in charge of the commercial regulation at Endesa Distribution. In 2000, he joined Endesa’s European M&A department. He was appointed CEO of Endesa Power Trading Ltd in 2003. He became Head of Energy Management for SNET, France, in 2004 and was appointed CEO of this company in 2008. In 2009, he held the position of Head of Corporate Development for E.ON France. In 2011, he founded Haya Energy Solutions (HES), a consulting firm which assists companies in optimizing their value chain: from strategy definition to day-to-day operations, based on a strong experience and understanding of the energy industry. From 2015 to 2018, Antonio was Chairman and CEO of 2 French CCGTs (2x410MW), owned by KKR. At the end of 2018, he joined Asterion Industrial Partners, a dedicated infrastructure investment fund, as an Operating Partner.

Education

Antonio graduated from the Escuela Técnica Superior de Ingenieros of Seville (Spain) and holds an MBA degree from Deusto University (Spain).

Antonio Haya

CEO