Platts: Continental European Day-Ahead Power Prices Rose 10% In January - Natural Gas Prices Fell 3% In Europe And Edged Higher In The U.K.

Day-ahead power prices in Continental Europe rose 10% in January, driven by cold winter temperatures and increased demand, according to Platts, a leading global provider of energy, petrochemicals and metals information.

The average cost of day-ahead power in Continental Europe was €52.52 per megawatt hour (/MWh) in January 2013, as indicated by the Platts Conti Index*. This is up from the December 2012 average of €47.78/MWh and up 13.1% from January a year ago when the average was €46.43/MWh.

“The colder, calmer weather conditions in Germany during the middle of January prompted a decline in wind power output just as demand was picking up,” said Henry Edwardes-Evans, Platts European power editor. “The greatest increase in day-ahead power prices last month occurred in France, where a high proportion of domestic heat systems are electric.”

In the United Kingdom, the January day-ahead power prices were less volatile, up only 1% versus December. Prices remained stable on the back of adequate supply from nuclear and gas-fired power stations and record-high wind energy levels.

However, on a year-over-year basis, U.K. day-ahead power prices were sharply higher last month at £50.49/MWh, up 21% from the January 2012 average of £41.84/MWh. The rise was attributed in large part to the 23% increase in U.K. natural gas prices, as both short- and long-term U.K. power price movements tend to follow the natural gas market.

While natural gas prices have also risen on the Continent, the impact on power prices has been less. The latest monthly price assessments from Platts show the average cost of day-ahead natural gas at Continental Europe’s most liquid hub, the Dutch TTF, was €26.55/MWh in January. That was down 3% from the December average of €27.32/MWh, but 21% higher than the January 2012 average of €21.94/MWh.

“While natural gas has a strong influence on power prices in the U.K., the Netherlands and Italy, it is much less influential in Germany, France and the Nordic countries, where coal, nuclear, hydro and wind are more dominant sources of electricity,” said Edwardes-Evans. “Sources say these divergent power price trends are clear indication of the need for greater interconnection between the markets, to allow the broad variety of generation sources to balance each other out.”

NOTE: All figures are monthly averages of daily day-ahead contract prices as assessed by  Platts.

*Platts Continental Power (CONTI) Index is a demand-weighted baseload average of day-ahead contracts assessed in Germany, Switzerland, France, Belgium and the Netherlands. The Platts U.K. assessments reflect day-ahead contracts assessed for firm delivery of power on the high voltage network of England, Wales and Scotland, and at the National Balancing Point for gas. The Platts assessments reflect prices as determined between buyer and seller in the open physical markets.