European power prices surged above €600 per megawatt-hour on Monday. This increase was due to a significant drop in wind generation. The spike shows how vulnerable electricity markets can be when renewable output is low, according to Bloomberg.
Key Details
The National Energy System Operator (Neso) issued a rare call for more electricity supplies. They cited a shortfall of nearly 1,400 megawatts during peak hours. After a review, Neso reduced this shortfall to 500 megawatts. However, they still needed extra generation from power plants to stabilize the supply. A spokesperson for Neso said there is no immediate risk to electricity supplies. They described the notice as a precautionary measure.
Forecasts suggest that low wind and solar generation will continue across northwest and central Europe through Wednesday. The UK grid operator warned of tight electricity supplies, especially in Germany, the UK, and Benelux countries. Low renewable output and increased heating demand could worsen the situation. Temperatures are expected to dip below normal. Futures prices for December contracts in Germany and France are trading near €200 per megawatt-hour. This is more than double the prices from the previous year.
Background
The ongoing pressure on power markets is clear. French day-ahead prices recently settled at €334.12 per megawatt-hour in an auction. The phenomenon known as Dunkelflaute, marked by low wind and solar generation, is likely to cause further price spikes this winter.
Related coverage: EU Energy Ministers to Discuss Demand Cuts Amid Crisis.
High power prices could affect energy stocks and related sectors, especially those that rely on gas-fired plants. Investors are likely to watch the situation closely as low wind conditions continue to challenge supply stability. Updates from Neso regarding electricity supply reviews are expected later this week.
Based on reporting by: livemint.com, theguardian.com