European Commission: Increase of Intra-European Energy Trade Despite Decreased Energy Consumption

The European Commission published its “Quarterly Report on European Electricity Markets”. Energy consumption decreased by 0.7% in 2013 compared to the first three months of the previous year. The development is to be explained primarily by the continuing economic recession, as also the GDP decreased by o.7%. A closer examination of the respective sectors reveals that the recession hit the important energy consumers industry and construction even harder, leading to a reduction of 4.8%.

For the Central Western European market (comprising Austria, Belgium, Germany, France, the Netherlands and Switzerland – CWE) examined jointly in the study, a general trend to decreasing electricity prices could be noticed for the second quarter 2013. One particular reason, on the energy supply side, is the increasing production from renewable energy plants. An all-time renewables peak occured on 16 June 2013, assuring 60% of overall energy production. Other factors include the low coal prices and the decreasing demand due to the economic situation. Thus the share of coal in the German energy mix rose to over 50% viewed over the first six months of 2013.

Despite the overall decrease in energy consumption, the physical cross-border flows in the EU increased by 9.4%, the monthly average amount being 22 TWh. The CWE countries strengthened their export position, reaching a peak in June. Biggest importer of energy, pursuing a longstanding trend, was Italy, followed by the British Isles.

The comparison of electricity prices for the industry and private households for the second semester of 2012 also published in the study places Germany second with reference to both electricity prices for the industry and for private consumers. For private households, only Ireland with 59.01 c€/kWh lies above the 40.28 c€/kWh in Germany, for the industry, only Italy with 25.94 c€/kWh above the 21.90 c€/kWh charged in Germany.

The increasing cross-border flows despite fewer consumption, besides corresponding to a persistent trend, show the increased integration of European markets. Intermittent renewable energy sources as solar and wind energy will continue to have a major and growing impact on the European electricity market and, due to their volatility, make further integration necessary also for the future.

In the CWE region, renewable power generation in Germany and nuclear availability in France were important determinants of wholesale electricity prices. Good levels of renewable generation helped to drive regional prices down in both the CWE and CEE regions to four-year lows by the end of Q2 2013. The monthly average baseload prices in Germany, France, Austria and Switzerland fell below 30 €/MWh at the end of Q2 2013, for the first time since March 2007.

In the first half of 2013, the share of solid fuels in the German power generation mix rose above 50%, which was higher than in 2012 (45%) and in 2011 (43%). Gas-fired generation remained unprofitable in Germany in Q2 2013, with the average of the clean spark spread falling as low as -19.5 €/MWh.

The Commission noted that frequent occurrences of negative prices in many European markets signal the need for better integration of renewables into the power grid. The Sunday afternoon peak in mid-June when wind and solar assured more than 60% of power generation in Germany resulted in negative hourly prices in the whole CWE region. Prices fell to below -100 €/MWh in Germany and Belgium. In neighbouring France prices fell below-200 €/MWh, due to oversupply in the regional power system.

Source: European Commission

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