Low water levels in hydropower reservoirs and soaring natural gas prices are putting upward pressure on power prices in the Nordic countries as winter approaches, Denmark-based energy trader Mind Energy says.
The surge in gas prices and potentially reduced hydropower generation in southern Norway and Sweden could lead to price spikes this winter, especially if there are prolonged periods of low wind speeds, the analysts said.
In its November recap insight, Mind Energy said that “Winter is upon us, and panic is evident across the European energy markets, which had clearly underestimated the seriousness of the situation earlier in the year.”
The price spikes in European natural gas prices in October and the “severe hydrological pressure on the Nordics ahead of winter” could send electricity prices soaring in the coming months, according to the analysts.
The Nordics will enter the heating season with noticeably less water in the system than normal at this time of year, Mind Energy reckons, adding that in the southernmost Norwegian price area, NO2, there has not been as little water in the reservoirs in 30 years as there is right now.
“This naturally puts further pressure on the already vulnerable southern price areas in the Nordics,” the analysts said.
“The Nordic countries are of course greatly affected by the extremely strained situation on the gas market, and the impact this has on Europe as a whole, but the other important element that has contributed to the large price increases in October is the strained hydrological situation,” Karsten Sander Nielsen, Senior Market Analyst at Mind Energy, said in the insight.
Peter Nikolaj Krebs, vice president of customer trading at Mind Energy, told Reuters, “When the wind drops, prices in Denmark and southern Sweden and southern Norway are getting set by German gas plants.”
With gas prices at their highest since the end of 2022, power prices in the Nordics, with lowered hydropower potential, are in for a volatile winter with price spikes.
By Tsvetana Paraskova for Oilprice.com
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