Carbon increases whereas gas continues to go down

Last week we discussed how, among others, the Netherlands warns against a rushed reform of the European electricity market. In this week’s market report, we delve further into the CO2 price, which is becoming more expensive while the gas price continues to decline.

Last week saw less wind generation and above average solar generation at the beginning of the week. As a consequence, the demand for power was relatively high compared to the latter part of the week. Starting from Wednesday onwards, wind generation picked up in the entire CWE region and temperatures increased in France, causing an additional drop in demand. Power prices in the spot market therefore fell, mainly in The Netherlands and Germany. In the end, the weekly average Dutch power price was 129,3 €/MWh, down by 20 euros compared to the previous week.

Gas prices continued to trend downwards and the day-ahead gas prices fell in the second half of last week. The contracts for the coming three months declined by 5 euros on average. March, April and May cleared at 49, 49.6 and 50 €/MWh, respectively.

A similar trend could be seen for the Dutch power prices for the month-ahead contracts. March fell  by 8 euros and settled at 126,6 €/MWh and April fell by almost 13 euros and cleared at 124,1 €/MWh.

Contrary to the declining gas and power prices, carbon prices picked up again. The December ’23 contract increased by approximately 3 euros and settled at 96,3 €/MWh. In addition, coal prices also increased. March cleared 4 euros higher than the previous week at 127,6 €/Ton.

The increase in both carbon and coal prices resulted in significantly worse dark spreads for the coming months. The dark spread for both March and April fell by approximately 12 and 16 euros and ended up at -6 and -8 €/MWh, respectively. Meanwhile, spark spreads slightly improved but remain negative: the spark spread for March was approximately -1,4 and for April it ended at -5 €/MWh.

The carbon price for 2024 surpassed the 100 €/EUA mark last week and ultimately settled at 100.7 €/EUA. The gas contract for next year continued to drop and fell by almost 4 euros, closing at 56.6 €/MWh. Coal prices, on the other hand, increased in price and the 2024 contract increased by 4.4 euros and cleared at 131.4 €/Ton.

The drop in gas prices partially resulted in a drop in Dutch power prices. The CAL-24 contract dropped by almost 5.3 euros and settled at 147.2 €/MWh.

Given the increase in carbon and coal prices, long-term dark spreads deteriorated. The dark spread for next year fell by almost 10 euros and cleared at 9.5 €/MWh. The spark spread slightly increased by 0.7 euros and cleared at 3.1 €/MWh.

Weekly changes