Market shrugs off low German nuclear availability in July

(Montel) Healthy hydropower and wind output should offset a 4 GW drop in German nuclear availability in July, although days with little wind and hot weather provided upside risk, market observers said on Tuesday.

German nuclear availability will drop to 62% of installed capacity of 10,803 MW from 8 July, when RWE will stop its Gundremmingen C (1,288 MW) reactor in the south for a month of maintenance work.

A day earlier, Eon will halt its Isar 2 (1,410 MW) nuclear reactor near Munich until 27 July, latest transparency data showed.

Meanwhile, Eon’s Brokdorf (1,410 MW) reactor remains offline until 16 July, although many market participants expect further delays due to the reactor’s ongoing oxidation issues on its fuel cells and because it still hasn’t received a restart permit from the local nuclear authorities.

“On the one hand you see availability decreasing and coal and gas prices up, but on the other hand, the weather is mild,” said a Dutch trader with respect to forecasts of moderate and even below normal temperatures for the next four weeks.

“Forecasts show a lot of rain in the coming days, so I expect spot prices to be very low in the near-term”, said Nena analyst Bengt Longva, adding the upcoming days would also see a lot of wind.

Priced in
With neither a tight system nor forecasts of hot weather, now was a good time for reactor maintenance, said a trader from Austria.

“The market has priced this in perfectly,” he added.

July baseload for Germany last traded at EUR 31.50/MWh in the brokered market, down from EUR 33.10 seen at the start of its term as front month contact.

“July is currently trading around the marginal cost level of a German CCGT plant,” said Longva. 

Gas units would typically set prices on a day with few renewables and low nuclear availability.

However, a scenario of hot weather, which would lift import demand in neighbouring France, and low wind in Germany could see some hours deliver at EUR 50-60/MWh, the analyst said.

At the same time, prices can drop very low on wet, cold and windy days.

“There is room for a lot of price variation – it all depends on what kind of weather we are getting,” Longva said.

What’s more, five weekends in July, where prices could drop to EUR 15-16/MWh, provided more of price risk on the downside than the potential spikes of single days with low renewables and high temperatures, said the Dutch trader.