Europe's electric power prices fall thanks to mild weather

The price decline was most marked in Spain, the Netherlands and the U.K., which experienced month-over-month declines of 46 percent, 11 percent and 8 percent, respectively

Day-ahead electricity prices in Continental Europe dropped sharply in January as mild temperatures suppressed demand and wet, windy weather facilitated high renewable energy generation, according to data just released by Platts.

The Platts Continental Power Index fell 15.8 percent in January 2014 to $54.46 per MWh compared to the December 2013 rate of $64.68/MWh. Year-over-year the index was down more than 18 percent.

The price decline was most marked in Spain, the Netherlands and the U.K., which experienced month-over-month declines of 46 percent, 11 percent and 8 percent, respectively.

In Spain, traders described hydro and wind power levels as "extreme," while low-cost German power exports combined with weaker natural gas and coal prices to deflate wholesale rates in the Netherlands. In the U.K., strong wind output, lower natural gas plant operation and strong continental imports pulled prices down in late January.

"France is a perfect example of how comfortable European power generation margins are this winter," said Platts Markets Editor Darren Stetzel. "Even strikes by E.ON and EDF workers at 3.5-gigawatts of French coal-fired plant and sudden capacity reductions at four nuclear plants have had little impact on power prices."

"The expectation is for more mild, windy weather ahead, with French baseload power for February delivery falling 23 percent ahead of expiry in the final week of January," said Stetzel. "And as the days get longer we see German solar beginning to exert an influence on hourly peak prices."

Meanwhile, December's uptrend in the price of U.K. day-ahead natural gas was reversed in January, as prices fell 6 percent on a month-over-month basis and declined 2.6 percent year-over-year. As with electricity, weak demand and oversupply proved the bearish forces on price, with no unexpected outages or prolonged cold snaps.

At Continental Europe's most liquid natural gas trading hub, the Dutch TTF, the average price of day-ahead natural gas was €35.51/MWh in January, down 5.2 percent from December.

A cold spell and reduced Norwegian production had pushed European natural gas prices upward in early December, but since then most fundamentals have been bearish, with the German day-ahead gas price sinking to a 17-month low by early February.

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