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Nordic spot power set to languish around 20-year lows

(Montel) Nordic power prices are likely remain at around 20-year lows in November due to full hydropower reservoirs and on expectations of a mild, wet start to the month, said analysts polled by Montel.

The November futures contract closed at EUR 14.10/MWh on its last trading, having fallen EUR 9 since September amid unseasonably wet and mild weather. If delivered at this level, it would be the lowest for November since the turn of the century and also below the October average of EUR 14.63/MWh.

“Our forecasts suggest an average system price of EUR 13.70/MWh this month. We have a very strong hydropower resource situation, more installed wind power production in the system and moderate demand,” said Sigbjorn Seland, chief analyst at StormGeo.

Others were slightly more bullish.

“We expect an average system price around EUR 16/MWh,” said Ole Tom Djupskaas, senior analyst at Refinitiv, though he added the price could range from EUR 8/MWh in a wet, mild scenario to EUR 20/MWh if turned drier and cooler.

Four-week forecast
Arne Bergvik, chief analyst at Jamtkraft, expected an average slightly above EUR 15/MWh, providing the most recent four-week forecast from SMHI of a turn to cooler and drier conditions later this month was correct, while Wattsight’s Tor Reier Lilleholt predicted EUR 14.50/MWh.

“Prices have seen a big setback over the past week, with hydrology and wind pushing the [contracts] down from the levels we saw in mid-October,” said Lilleholt.

Temperature developments would become an increasingly important price driver going forward as a shift to colder weather could alter the demand picture, he added.

The most recent 14-day weather forecasts predicted rain and snow equivalent to around 12 TWh of hydropower output, which compared an average of 10 TWh, and came on top of already near full reservoir levels, figures from Montel’s Energy Quantified showed.

Temperature are forecast to stay above normal for the first half of the month. 

Full reservoirs
“Reservoirs are already very close to full and at the moment it seems very hard for the hydropower producers to get rid of their water at ‘good’ price levels,” said one trader but believed the average spot price would climb above EUR 15/MWh due to higher demand later in the month.

Nordic hydropower reservoirs were currently 90% full, more than 8 percentage points above the median value for the 2000-2019 period, according to Nord Pool figures.

Norway’s NO1 and NO2 bidding zones – which saw negative hourly prices for only the second time in history on Monday – had reservoir levels at 96.7% and 94.7%, respectively.

Installed wind power output in the Nordic region had risen by almost 6 GW since last year, according to EQ, increasing the risk of low prices in periods with high wind power output.


Reporting by:
Olav Vilnes
16:38, Monday, 2 November 2020