Wholesale electricity prices in European markets rose above 600 euros per megawatt-hour during evening peak consumption periods on Monday, due to a sharp decline in wind power generation, reflecting growing pressures on electricity markets amid falling renewable energy production.
Expectations of production decline
Bloomberg reported that government and commercial forecasts indicate that wind and solar power generation will continue to decline across northwestern and central Europe until next Wednesday, due to a slow-moving weather system causing calm winds and cloud cover over some of the region's largest energy markets.
Wind speed reductions are expected to be particularly sharp in Germany, the United Kingdom, and the Benelux countries, while the UK's electricity grid operator warned of a potential drop in electricity supply margins below required levels on Monday morning, estimating the gap at approximately 1.4 gigawatts.
Impact of "Dunkelflaute" and rising demand
These developments come as electricity prices rise across Europe, coinciding with the rise in natural gas prices this year, as gas-fired power plants often determine the marginal price of electricity. The impact of reduced renewable energy production is more pronounced during periods of cold, calm winds, and low sunlight, conditions known by the German term "Dunkelflaute."
Increased demand for heating may also contribute to pressure on energy markets, given forecasts of temperatures dropping by one to three degrees Celsius below normal levels this week, according to meteorologist Ben Davis from MetDesk.
Futures prices and current levels
These pressures are also reflected in futures prices, with electricity contracts for December in Germany and France currently trading at levels around 200 euros per megawatt-hour on the European Energy Exchange (EEX), more than double their levels a year ago. In France, the electricity price for delivery reached 334.12 euros per megawatt-hour in an auction conducted by the Epeex Spot platform on Monday, its highest level since December 2022.
In a related context, Eurostat reported last Wednesday that the annual inflation rate in the eurozone rose to 4 percent in October, compared to 3.8 percent in September, driven by rising energy prices which recorded an annual increase of 20.8 percent.
Source: Syrian Arab News Agency (SANA)
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