CWE spot power price convergence rises in March

Day-ahead hourly power prices in the central-western European (CWE) flow-based market coupling (FBMC) region converged nearly two-thirds of the time in March 2019, the highest level for the period since the algorithm was launched in 2015. Forward prices indicate that the trend could reverse again in the coming months, as spreads have been widening between CWE prompt contracts.

Hourly German, French, Dutch, Belgian and Austrian day-ahead spot prices converged 59pc of the time in CWE last month, up from 37pc in March 2019 and 31pc in February this year. The average convergence for March in the past four years stood at 39pc.

Day-ahead prices in the CWE market coupling region diverged the most in hour 13 last month, with a spread of €5.98/MWh between the lowest priced market, Germany, and the highest priced market, France. Total day-ahead commercial exchanges in the market coupling region averaged 10.17GW, data from Entso-E show.

Prices converged the most in hour 20, with a maximum spread of €0.97/MWh between the lowest priced market, Germany, and the highest priced market, the Netherlands. Total day-ahead commercial exchanges in the market coupling region averaged 9GW for that hour.

Day-ahead prices converged the most on the Dutch-German border, with the Netherlands delivering at a premium of €2.24/MWh in March. The Netherlands delivered at a €9.89/MWh premium in the same month last year. The highest Dutch average premium was €5.59/MWh in hour 13, and the smallest was €0.33/MWh in hour 18. The highest Dutch premium in March last year was in hour 2, at €16.10/MWh on average, and the smallest in hour 18, at €2.86/MWh.

Day-ahead price convergence also rose between France and Belgium, with the lowest spread in off-peak hours. Belgium delivered at an average premium of €0.19/MWh for base load, rising to €2.01/MWh for peak hours, and against an average premium of €3.99/MWh in March last year.

Border congestion eased last month as demand fell across the region because of measures to curtail the transmission of Covid-19. Dutch demand stood at 10.6GW, down by 14pc on the year and 22pc on the month. German demand fell by 2pc on the year and 6pc on the month to 56.84GW. French demand declined to 55.61GW, down by 2.6pc on the year and 9pc on the month. Belgian demand declined by 8pc year on year and 9pc month on month to 9.2GW. Weakening demand has combined with lower costs for gas-fired plants to bring marginal generation costs across borders into line with each other. Breakeven costs for a 55pc-efficient gas-fired plant in Germany averaged €23.73/MWh on a day-ahead basis in March, against €26.69/MWh in February and €24.66/MWh in March 2019.

Prompt prices also fell throughout March, but spreads between CWE countries moved in mixed directions. Spreads between the French and German April and second-quarter 2020 contracts widened from the beginning of the year and the beginning of March, compared with the contract expiry. German April base load fell by €11/MWh from beginning of March to expire at €17.25/MWh — a premium of €2.05/MWh to the French contract. At the beginning of March, the German April contract stood at a premium of €0.30/MWh to the French contract and at a discount of €1.20/MWh at the beginning of 2020. At the end of March — April contract expiry — the German contract stood at a premium of €2.05/MWh to the French contract.

German second-quarter base load expired at €20.25/MWh — down by €9.75/MWh on the month — and closed at a premium of €2.05/MWh over the French contract. This was up from a premium of €1.30/MWh at the beginning of March, and €1.65/MWh the beginning of this year.

Equivalent spreads for 2019 contracts narrowed over the same periods last year. The German base-load April 2019 contract expired at €36.05/MWh, at a discount of €0.65/MWh to the French contract, down from a discount of €3.15/MWh at the beginning of 2019. The same trend was seen for the second-quarter 2019 spread.

Spreads between German and Dutch prompt contracts moved in different directions. The German base-load April contract closed at a discount of €2.75/MWh to the Dutch contract, out from €1.30/MWh at the beginning of March and €2.50/MWh the beginning of the year. The German base-load second-quarter 2020 contract narrowed its discount to the Dutch contract to €1.85/MWh at contract expiry, compared with €1.95/MWh at the beginning of year, but wider than €0.55/MWh at the beginning of March.

By Felicia Grosse