European Power Prices Surge Amid French Supply Cuts, Coal Gains

06 October 2016 | Trading

Electricity for next month rose to records across northwest Europe, boosted by reductions in French nuclear supply and soaring coal prices.

Next-month power in France, Germany, the U.K. and the Nordic region reached records, according to broker and exchange data compiled by Bloomberg. Year-ahead German electricity, a European benchmark, increased to a 14-month high. 

ower contracts in France surged after EDF cut the output targets for its 58 French reactors on Sept. 21 to include additional safety checks at a dozen units in 2016 and 2017, which impacted prices neighboring countries with connecting power cables including Germany and the U.K. A 63 percent jump in coal this year is boosting longer-dated electricity contracts, according to Bayerische Landesbank, driven by lower domestic production in top user China.

While France is having an influence,“the main impact still stems from coal price, which is still driven higher by Chinese import demand and former supply restriction,” according to Andreas Speer, a senior commodity analyst at BayernLB. “When this impact will end is hard to say, but probably in this quarter.”

French supplies tightened further Thursday after EDF halted its Chooz-2 unit and cut output at its Gravelines-4 and Cruas-2 reactors, grid data show. The utilization of EDF’s nuclear plants was 57 percent Thursday, 13 points lower than at the same time last year, according to data from Genscape Inc. Supply was further reduced after Uniper had an unplanned halt at its 595-megawatt Emile Huchet-5 coal-fed unit, RTE data show.

That comes just as the weather starts to turn cooler for winter and demand for heating rises. Maximum consumption is expected to rise above 70 gigawatts from November compared with about 57 gigawatts this week, according to French grid operator RTE’s website.

French November power rose as much as 5.3 percent to a record 62 euros ($69) a megawatt-hour, the highest month-ahead price since November 2011, according to broker data compiled by Bloomberg. German, Nordic and U.K. contracts also rose to record levels. The German 2017 contract increased as much as 3.6 percent to 31.50 euros a megawatt-hour, the highest since July 2015.



Source: Bloomberg