Electricity prices in Europe are falling this spring from two-year highs in the winter of 2025 as natural gas prices fall and renewable power generation jumps.
Expensive natural gas in the winter amid cold weather and fast-depleting gas storage sites pushed up power prices in Europe to the highest in two years. Low wind speeds curtailed a lot of wind power generation in the winter, forcing power generators from Germany to the UK to run more gas-fired electricity capacity. With natural gas prices soaring in January and February 2025, power prices also surged to two-year highs.
Germany, for example, saw lower-than-normal winds for four months, which reduced wind power generation, boosting electricity prices and the reliance on fossil fuels.
Power prices across Europe also jumped, to the highest level in 20 months, additionally burdening key industries in major economies that had just started to recover from the 2022 energy crisis. Households also felt the shock of surging power and heating bills, reminiscent of the 2022 energy crisis.
Major economies in Western Europe – Germany, France, the Netherlands, Spain, and Italy, saw a surge in energy costs this past winter. Economies in eastern and southeastern Europe suffered even more as energy prices have been higher than in Western Europe in recent months.
But the end of the winter, the recovery of wind power generation, and the rise in solar output in the springtime have now more than halved Europe’s wholesale spot power prices compared to the highs seen early this year, Reuters columnist Gavin Maguire notes.
In early March, the strongest solar power generation in Germany since September sent intraday power prices in Germany, Belgium, and the Netherlands to below zero. Negative power prices, while beneficial for some consumers in some countries, generally discourage investments in new capacity as renewable power generators don’t profit from below-zero prices.
Solar output in Europe is soaring and is set to boom in the summer. But the volatile gas market could begin pushing power prices up later this year with the coming of the next winter.
By Tsvetana Paraskova for Oilprice.com
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