European gas and electricity market reports in the second quarter of 2017

The European Commission publishes regular market analysis reports on European gas and electricity markets and energy prices and costs in Europe. The quarterly reports analyse the main factors behind price and volume evolutions on the market and they analyse gas and electricity market interactions between countries.

 

Highlight of the European Electricity Markets Report

 

  • In the second quarter of 2017 wholesale electricity prices at EU level showed a great degree of stability. As both coal and natural gas prices were relatively stable in Q2 2017, marginal electricity generation costs and wholesale market prices were mainly affected by changes in the generation mixes.
  • The profitability of both gas-fired and coal-fired generation decreased in Q2 2017 compared to the previous quarter. In the case of coal, clean dark spreads were in negative ranges in most of Europe, implying a further squeeze-out of coal from power generation.
  • On 21 April 2017, for the first time ever, daily coal-fired power generation fell to zero in the United Kingdom. The share of coal in the UK generation mix was barely 2% on quarterly average in Q2 2017.
  • In June 2017 solar power generation reached the highest monthly value ever recorded in Germany, France and the UK. In the same month renewable energy sources (hydro, wind, solar and biomass) assured 32% of the EU electricity generation mix.
  • In the UK there were few occasions during Q2 2017 when receding variable renewable generation coincided with electricity cross-border capacity reductions, resulting in sudden wholesale market price spikes. Variable renewable sources need to be properly integrated in the grid and sufficient interconnections with neighbouring countries need to be assured.

 

 

 

Highlight of the European Gas Markets Report

 

  • EU gas demand has shown a year-on-year increase for the sixth quarter in a row, helped by a continuous growth of gas use in the power sector.
  • The share of LNG from total imports reached 16%, the highest level in the last four years. This was facilitated by a strong convergence between global prices.
  • For the first time, LNG imports from the US reached Northern Europe: the Netherlands, Poland and the UK.
  • The closure of the Rough facility in the UK and the reduction of the Groningen production cap by a further 10% mean that Northwest Europe will have to rely on other sources of seasonal flexibility.

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