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Cold spell may see Nordic spot exceeding German – analyst

(Montel) With weather forecasts showing a sustained period of cold, dry weather in the Nordic region, soaring spot power prices are likely to rise further, possibly exceeding those in Germany, an analyst said on Tuesday. 

“We are heading towards a sustained period of cold and dry weather,” said Ivan Fore Svegaarden, analyst and meteorologist at Tradewpower.

A cold spell since Christmas had had a profound impact on the market, with the Nordic February power contract more than doubling to EUR 46.60/MWh.

“I think prices can rise even more. The fundamental weather models that are used by the power market participants often underestimate the strength of the SSW [sudden stratospheric warming] we currently see,” said Svegaarden.

In recent years some extreme cold, winter snow events have all been connected to the surface effects of sudden stratospheric warming.

“Typically in an SSW, we get an initial period of cold and dry weather followed by a period where forecasts are more unsettled. Then a secondary effect hits that may give very cold weather for up to 5-8 weeks,” said Svegaarden.

Depleting stocks
Such a scenario could deplete hydropower stocks in the region and push spot power prices above German levels during February, he added.

German baseload power prices for February last traded at EUR 60.10/MWh, while the peak contract was at EUR 73.50/MWh.

Beate Tveita, meteorologist at StormGeo, agreed the weather was likely to stay dry and cold for the next few weeks in the Nordic region but was more uncertain over the long-term impact.

She compared the situation to the “beast from the east” in 2018, when energy prices across Europe soared in February and March due to very cold weather.

This year there was a greater probability of low pressure hitting the Nordic region later in the winter, which typically brought mild, unsettled conditions, she said.

Reporting by:
Olav Vilnes
15:16, Tuesday, 12 January 2021