(Montel) Long-dated German power prices are trading at a huge near EUR 20 premium to their Nordic counterparts due to massive wind power growth expected in the latter region by 2024, said StormGeo analyst Sigbjørn Seland.
“Nordic and German spot prices have delivered at a fairly similar level over the past 20 years, close to the short-term marginal cost of coal-fired plants,” Seland told the Pareto energy conference in Oslo on Thursday.
“But over the past 5-6 years we have seen that Nordic prices have delivered below the coal cost because we have got a lot of new wind power plants.”
Nordic power averaged EUR 43.99/MWh last year, slightly below the German average of EUR 44.47/MWh but the Nordic 2024 contract last traded at EUR 30.88/MWh, with the German equivalent at EUR 49.78/MWh.
Doubling wind
Low futures prices in the Nordic region could be explained by expectations of high wind power output – it is set to more than double from 40 TWh currently to 89 TWh by 2024 – as well as the signing of several bilateral long-term power purchase agreements (PPAs).
“We see several PPAs between wind power producers and large industrial consumers. We suspect that is the main reason why futures prices are trading at such low levels,” he said.
The long-term marginal cost of onshore wind generation would gradually replace coal as the most important price driver for Nordic contracts, said Seland.