Nena News

Low Dutch prices to limit Nordic exports on cable – analysts

(Montel) A recent slump in Dutch power prices may limit Nordic exports via the new Cobra interconnector with Denmark, at least in the short term, analysts said this week.

Analysts had for a long time assumed that flows on the 700 MW link – due to be commissioned on Saturday – would largely go from Denmark to the Netherlands, as on the NorNed cable from Norway, because power prices were typically lower in the Nordic region.

This is backed up by figures from power exchanges Nord Pool and Epex Spot, showing western Denmark had lower spot prices than the Netherlands on average every month back to January 2011.

Plunging gas
However, in August, prices in western Denmark were EUR 0.43 higher than their Dutch counterparts on average, mainly because the latter country’s power prices fell in response to plunging gas prices, said chief analyst Sigbjørn Seland at Stormgeo.

“For the rest of 2019 we expect that Cobra will generate small net exports from Denmark to the Netherlands, probably of around 0.5 TWh,” he said.

The cable could potentially see 6.1 TWh of exports a year.

Tor Reier Lilleholt, chief analyst at Wattsight, said the unusual price difference in August was impacted by limited export capacity from Norway to Denmark, causing Danish spot prices to align more with those in Germany and the Netherlands.

“Over time we believe Cobra will have a clear bullish effect [on Nordic power prices] and support exports in wet years,” he said, with the Nordic region very reliant on hydropower.

The Danish Energy Association held a similar view. “We still believe power prices will be higher in the Netherlands than in Denmark. It is hourly price differences that are interesting for deciding the direction of the power flow. We believe in more export than import,” it said, with the association’s long-term forecasts pegging Dutch prices EUR 3-4 above their Danish equivalents in 2025.

Higher Dutch prices
Futures prices on power exchanges Nasdaq and EEX indicate significantly higher prices in the Netherlands than in Denmark going forward, with the Q1 20 Dutch power contract trading at a EUR 9/MWh premium over its Nordic equivalent. The premium for the Year 2020 contract stood at EUR 14/MWh.

Seland, however, said the Nordic Q1 was underpriced on the futures curve and doubted net export volumes in the January-March period over the link would be any higher than the 0.5 TWh he expected for the rest of this year.

Spot prices on the Dutch TTF gas hub fell to EUR 7.37/MWh on Tuesday, the lowest level in 10 years.


Reporting by:
Gert Ove Mollestad
10:47, Wednesday, 4 September 2019