Nena News

MONTHLY – Nordic power set for 13% plunge in damp October

(Montel) Nordic spot power prices are set to fall 13% month on month in October as wetter than normal weather forecasts dominate what is on average the wettest month of the year in hydropower-rich Norway.

“The forecasts show plenty of rain, a lot of wind and high temperatures. The weather input couldn’t be more bearish,” said senior analyst Sigbjørn Seland at Nena.

With seasonal reservoirs in the Nordic region approaching full, the forecast precipitation would trigger sharp competition among hydropower producers and bring significantly lower spot prices at the start of the month, he added.

Big drop?
The October contract on Nasdaq Commodities closed at EUR 27.40/MWh on September’s last day of trading, compared to an average system price in September of EUR 31.59/MWh, signalling a drop of 13%.

“I think the contract is currently priced a bit low but it is not completely unlikely that spot prices could average this level,” Seland said. 

Indeed, hourly prices could even drop below EUR 10/MWh in off-peak hours, especially in periods with high wind power infeed as hydropower producers risked being forced to produce amid higher inflow, he added.

The latest four-week weather forecasts point to rain and snow equivalent to a potential 22-23 TWh of hydropower production in Norway and Sweden, compared to a seasonal norm of 18 TWh, according to Swedish forecaster SMHI.

There was, however, some uncertainty connected to the impact of current depressions over the Atlantic and how much “leftover” rain would reach Scandinavia, said SMHI meteorologist Anna Derneryd.

On Monday morning forecasts were a touch drier for next week, although SMHI still expects more precipitation than normal in the next 10 days.

Nuclear restarts
In addition to the weather, the spot price in October would depend on how quickly Sweden’s nuclear power plants ramp up after maintenance outages, said Frode Myrland, trader at Norwegian utility NTE.

“If the weather changes back to a dry pattern, along with nuclear start-up delays, this will clearly lift prices,” he said.

Swedish nuclear reactor Ringhals 3 (1,063 MW) is currently running at 50% of capacity due to a faulty generator and is expected back in full operation on 8 October, while the country’s largest reactor, Oskarshamn 3 (1,400 MW) is scheduled for restart on 11 October and Forsmark 2 (1,120 MW) on 14 October.

Further out, the Q1 18 contract closed at EUR 31.53/MWh on Friday and the front-year contract at EUR 26.75/MWh, having both fallen 10% since mid-September in line with decreasing coal prices. 

“I think that the coal market has the potential to fall further, after rising significantly over a long period. If this happens, the long end of the Nordic power curve will be lowered even more,” Myrland said.


Reporting by:
Roger Fry
07:43, Monday, 2 October 2017