Improvement of the Hydrobalance, Varying Wind Power Production

Source: www.gulfoilandgas.com 11/19/2021, Location: Europe

Very high volatility in both the spot market and the futures market has continued over the past month. In these times, the importance of a long-term risk management strategy for a successful management of energy purchases or production is highlighted.

In addition, these times require rapid reactions to changes in the market situation and offer good opportunities for reduced risk in active financial trading of electricity.

From a drier summer than normal and an early autumn, October became the rainiest month in several years. Only in October it rained approx. 14 TWh more than normal, which lifted the Nordic hydrobalance from the pit we saw in mid-September. At the moment, the Nordic hydrobalance is approx. -3TWH ie. slightly below normal.

In addition to improving the hydrobalance, fossil fuels were corrected down from their extreme peaks we saw in early October. As a result, the electricity futures were also naturally corrected. German electricity futures have continued to go hand in hand with the marginal cost of gas-fired production.

The global supply of natural gas can still be considered strained and the price of coal has varied greatly. The energy market is now also closely following Russia's gas exports and capacity bookings to Europe in the coming weeks. Emission rights have been traded relatively stably on a monthly basis, but demand is still high as coal-fired production has been high.

Wind power production has been very variable over the past month, and in the next few years the wind power that enters the Nordic system will increase. In Sweden alone, the cumulative wind power capacity is expected to increase next year by approx. 20%, but most new projects remain in electricity area SE2. Now you can make long-term price hedges based on wind power through so-called Power Purchase Agreements.

The risk of spot volatility and price range differences remains as the spread to continental prices is very high.


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