Belgian premium rises as Alegro launches commercially

The Belgian spot index premium to Germany for delivery tomorrow rose to its highest in 22 sessions, on the first day of commercial operations on the day-ahead market of the 1GW Alegro interconnector.

The Belgian spot index for delivery tomorrow settled at €33.76/MWh and at a premium of €7.37/MWh to the equivalent German day-ahead settlement, the highest since 28 October.

An average of 142.47MW of net commercial cross-border capacity was allocated in the German-Belgian direction.

The result of the day-ahead allocation was in line with those seen during shadow allocations from 3 November, which suggested that Belgium would largely be a net importer from Germany.

The wider day-ahead spread between the markets was also down to forecasts pointing to high wind generation in Germany. German wind output is estimated at 35.82GW tomorrow, equivalent to a load factor of 60pc, which is also expected to weigh on fossil fuel output.

Overall, Germany is scheduled to be a net exporter of power to its borders in the central western European (CWE) flow-based market coupling (FBMC) region.

Belgium is expected to be a net importer this winter based on current prices. The Belgian December base load last traded at €41.25/MWh in the over-the-counter (OTC) market this morning, and at an €8.10/MWh premium to the German equivalent at the same time, Argus data show.

And the Belgian 2021 base-load product closed at €43.75/MWh yesterday, €5.10/MWh above German power at the same time, also suggesting higher demand for German power in Belgium.

But the spread is narrower for the contracts delivering in the spring and summer next year, suggesting that flows could switch direction more frequently during that period.

Alegro is the first interconnector between the two countries and is expected to help enhance their security of supply. Belgium's status as a net importer depends on the availability of its nuclear capacity. The Belgian government plans to maintain a 2025 exit date for nuclear, with the option of revising the plans by the end of next year.

Germany will completely phase out its nuclear fleet by the end of 2022 and plans to close 3GW of lignite-fired capacity in the Rhenish region, close to the Belgian border.

By Jacqueline Echevarria