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German power set for more price spikes – analysts

(Montel) German power prices will likely see more spikes due to costly coal plant start-ups and a growing capacity of intermittent wind and solar power, analysts said.

Earlier this week, intraday prices jumped to just shy of EUR 4,000/MWh, the highest since July 2019, and the Tuesday baseload contract settled above EUR 70/MWh, amid a combination of strong demand, poor conventional plant availability and a lack of wind.

“This is something we are going to see more often now, the extremely high prices at the beginning of the week”, said Konstantin Lenz at Wattsight.

He noted with many coal plants offline for the weekend, power prices will soar early in the week, as the operators need to cover their ramping-up costs for those units.

“Often, operators ramp up their plants only for a few hours, such as the evening demand spike, so they need to distribute the ramp-up costs over two hours or so, which is driving spot prices,” he said.

Furthermore, the shorter days with no solar output during the evening hours and increased demand for lightning when it gets dark sooner should fuel the risk for price spikes, Lenz said.

A German power trader agreed. “There is always this risk we need to assess ahead of the weekend – will those power plants that are offline from Friday evening come back to the market on Monday or not.”

The plants that remain offline could result in a supply shortage in the market and in turn drive spot prices again, he added.

Rising costs
In the current market environment, with carbon prices near all-time highs and still relatively low gas prices, coal plants are unprofitable during the weekend hours when demand is low.

Yet some coal-fired plants will try to fetch some profitable hours during the week, according to the analysts.

Looking ahead, for instance, hard coal and lignite capacity on Monday was expected to rise to 11.3 GW and 12.9 GW, up from 9 GW and 10.9 GW on Saturday, showed the latest EEX transparency data.

Meanwhile, wind power will slide to 2.5 GW on Monday, 10 GW below the norm, with output dropping to around 0.5 GW at 18:00 CET, when solar output will stand around 2 GW and drop to zero in the following hour, according to data from Montel’s Energy Quantified.

The price for delivery on Monday is trading around EUR 59/MWh, which would be the highest cost for a Monday since the beginning of 2019.

“Looking at the current prices coal plants can produce during peak hours and maybe even around the clock. At least Monday to Friday,” said Sigurd Lie, a senior analyst at StormGeo.

Reporting by:
Julia Demirdag
15:40, Friday, 18 September 2020