The seasonally strong decrease in demand pushed down the average May spot price by around 8% below the previous month’s level. The monthly average ranged at 42.98 EUR/MWh, whereby weekends prices remained very low. Coincidentally, wind speeds were very high on the low demand Sundays, which also decreased power import prices in Germany. This effect was possibly strengthened by market coupling on the Baltic Cable, in practice since 10 May. Water played a twofold role in May. On the one hand, over the norm temperatures promoted strong snowmelt, whereby run-of-river power pants had a high production. On the other hand, this snowmelt led to sinking water reservoir levels (snow, reservoir, soil, ground water), which in turn increased production costs from storage power stations during peak load periods. This created an unusually pronounced weekly pattern: The peak load price in May ranged from 21 EUR/MWh to 54 EUR/MWh and was 28 EUR/MWh higher than in April!

The poorer hydro balance, and, in turn, increasing water value also had its effects on term prices. From mid-May, they rallied after a downward tendency in the first half of the month. At the same time, this also corresponded with movements on the fuel and CO2 markets. CO2 prices sank at the beginning of May because fears that the Greek debt crisis could spread to the European real economy pointed to lower emissions. Toward the end of the month, prices climbed up again when the EU and the newly elected British government began thinking out loud on a unilateral step toward a 30% reduction target.

 

From 31 May to 11 June, negotiations under the UN Framework Convention on Climate Change will be taking place in Bonn. Although no concrete results are expected, media reports could provide support. In addition, on 6 June, the German constitutional court will probably decide that the government’s planned runtime extension for nuclear power plants will have to pass the Federal Council. Since the government has lost its majority in the Federal Council after the election defeat in Nordrhein-Westfalen, the opposition may be able to sustain the nuclear phase-out. Aside from expected higher CO2 prices, we also anticipate increasing oil prices and stable gas, as well as coal prices. As a result, we expect the current upward pressure on term
prices to become even stronger amid the tense hydro situation. The dry weather is also likely to support the spot market. However, we expect that temperatures above the historical norm will reduce demand more than usual for this time of year. In view of these facts, we expect spot prices ranging at 41-43 EUR/MWh on the June average.


April 2010:
On the average, the Nordic system price closed well below the previous month (-13.8%). The price decline can be attributed to warmer temperatures, which rose to normal levels in April. Furthermore, availability of Swedish nuclear power plants improved from 73% in mid-March to 85% at the end of April. Due to the onset of snowmelt, inflow was higher than last month. In contrast, precipitation was even lower than last month and the hydro balance remained low at -39025 GWh at the end of April. In the last week of April the NorNed cable (700 MW) came back from repairs, which, however, had not a price sinking impact. Although for May seasonally warmer weather is forecast, temperatures are likely to remain below the norm. High precipitation and snowmelt will likely produce high inflow, gradually improving the hydro balance. Nuclear availability should continue to improve in the course of the month. Overall we anticipate lower prices at around 45 EUR/MWh based on the good supply situation and expected higher inflow.
 

Term prices rose strongly along the entire curve after Easter, with higher gains on the short end than the long. From mid-April on, the Cal11 climbed over Cal13. The trend was supported by high power term prices in the Central European countries, the strong rise of the fuel complex and CO2 prices, as well as the still very low hydro balance. Verified CO2 emissions for 2009, published on 1 April, were at the lower end of expectations (-11.4% in comparison to 2008) and failed to give CO2 prices a clear direction on that day. Right after Easter, however, CO2 prices increased strongly and in no time broke through several resistance lines.

The price increase could also have been due to the fact that the system was 8% short in 2009, and in contrast, only 4% long in 2009. This may indicate that the system will be short at the end of phase 2 if the economy picks up. Furthermore, the European Commission released new auctioning rules in mid-April, which point to fewer certificates before 2013. The downgrading of Greek, Spanish and Portuguese credit ratings by rating agencies at the end of April only interrupted the CO2 price rally temporarily. In May, we expect CO2 prices to stay stable, with a bias towards the downside. This is likely to add stability to Nordic term prices. The improved hydro balance could, however, put some pressure on prices and we anticipate that the short end and the Cal11 will adjust downwards while contracts with later due dates will likely remain stable.


March 2010:
The system price in March lost value significantly. At 57.04 EUR/MWh on the monthly average, it closed 17.2% below the previous month. Price losses are mainly due to continuously rising temperatures, which were even slightly above the norm at the end of the month. Furthermore, water value decreased strongly due to heavy precipitation in weeks 10 to 12, so that the hydro balance improved by the end of week 12 to slightly below -40,000 GWh. However, the tense power plant park situation prevented even further price losses – the return of Oskarshamn 3 (1,400 MW) was postponed several times and is still running at reduced capacity (57%). The NorNed-Kabel (700 MW) remained out of operation and is expected back online in the second half of April. During the first half of the month the situation is expected to stay tense because Forsmark 3 (1,170 MW) will be taken off grid in week 15. Wind speeds in Denmark are forecasted as only moderate with little precipitation in the Nordic area. Initially, temperatures are expected to remain above the norm, but in the second half of the month, they should exhibit a stable to slightly warmer trend rather than a seasonal increase. For the time being, we expect prices in the first half of the month to remain in the range of 44 to 50 EUR/MWh. An improved power plant situation in the second half of the month could have a slightly bearish effect on prices. Therefore, we expect a monthly average price of approx. 48 EUR/MWh.