The region of high pressure over continental Europe, that had been blocking mild low pressure weather systems coming in across the Atlantic, has finally given way allowing temperatures to rise, reducing pressure on the short end of energy curves. Temperatures have also risen on the East coast of the US, leading to correlated declines on both sides of the Atlantic.
The weather looks set to be wet and windy for much of the rest of this month which means the pattern of reducing withdraw rates of gas from storage in Europe is likely to continue as wind generation supplies grids and space heating demands decline.
Power markets have also been softening across the curve on falling EU and UK carbon emission allowance prices. German Chancellor Merz was reported to have said today that the EU should be open to looking at the impact of the EU ETS on energy prices. "We should be very open to revise it or at least to postpone it", he said. The December 26 EUA future traded as low as 76.10 €/MT today. The corresponding UK Allowance future fell even more dramatically and traded below 43 £/MT (or 50 €/MT) at one point – so much for the debate about linking the two markets! Long dated power prices fell consequently. Ultimately, the ETS and its subsequent expansion was not envisaged in an environment when European energy markets are as constrained as they have been in recent times.
The results of the non-offshore wind auctions for AR7 was announced this week (the offshore wind results came out in Janurary). While the clearing price for onshore and offshore wind were up on AR7, the price for solar was down. Here is a comparison in 2024 price terms:
| AR6 Clearing Price | AR7 Clearing Price | % Change | |
|---|---|---|---|
| Solar PV | 69.5 | 65.2 | -6.2% |
| Onshore Wind | 70.7 | 72.2 | +2.2% |
| Offshore Wind | 81.8 | 91.2 | +11.5% |
| Commoditiy | Front contract (£p/therm) | Summer 26 (£p/therm) | Winter 26/27 (£p/therm) | Summer 27 (£p/therm) |
|---|---|---|---|---|
| Price | 75.14 | 71.50 | 76.24 | 60.75 |
| Weekly Change | -4.58 | -0.95 | -0.29 | -0.12 |
| Commoditiy | Front contract (£/MWh) | Summer 26 (£/MWh) | Winter 26/27 (£/MWh) | Summer 27 (£/MWh) |
|---|---|---|---|---|
| Price | 74.72 | 67.25 | 73.79 | 60.05 |
| Weekly Change | -8.16 | -5.63 | -4.81 | -4.10 |
| Commoditiy | US Gas ($/mmbtu) | Brent ($/b) | EUA (€/MT) | UKA (£/MT) |
|---|---|---|---|---|
| Price | 3.19 | 69.75 | 77.06 | 47.89 |
| Weekly Change | -0.28 | 0.29 | -4.37 | -12.51 |
No representation or warranty, express or implied, is or will be made and no responsibility or liability is or will be accepted by Investec or its Affiliates in relation to the accuracy, reliability, suitability or completeness of any information contained in this document and any such liability is expressly disclaimed. This document does not purport to be all inclusive or to contain all the information that you may need. Investec gives no undertaking to provide the recipient with access to any additional information or to update this document or any additional information, or to correct any inaccuracies in it which may become apparent.
This document does not take into account the specific investment objectives, financial circumstances or particular needs of any recipient and it should not be regarded as a substitute for the exercise of the recipient’s own judgement and due diligence. Investec does not offer investment advice or make any investment recommendations. Recipients of this document should seek independent financial advice regarding the appropriateness or otherwise of investing in any investment strategies discussed or recommended in this document and should understand that past performance is not a guide to future performance, and the value of any investments may fall as well as rise.
Investec expressly reserves the right, without giving reasons therefore, at any time and in any respect, to amend or terminate discussions with the recipient of this document without prior notice and hereby expressly disclaims any liability for any losses, costs or expenses incurred by such recipient.
