(Montel) German export flows may rise this winter as coal generators ramp up to account for constrained gas-fired production in other countries, reversing the country’s shrinking export balance in recent years, market sources said.
Current price levels indicated high net exports to the country’s main trade partner France this winter, with the German Q4 discount more than doubling since January to above EUR 16/MWh despite close to record-high levels of EUR 122.25/MWh in Germany and EUR 139.10/MWh in France.
“I believe if you compared to earlier years then the German export flows will be higher this year than for instance last year, when gas prices were lower than coal,” said Bengt Longva, analyst at StormGeo.
In contrast, German net exports from January to September were down 59% from the five-year average, according to Entso-e transparency data.
“It looks like if there’s a real winter in France then they [French power generators] won’t be exporting more, so Germany will profit from that,” said Jean-Paul Harreman, analyst at consultancy Enappsys.
“The low marginal cost of coal will be a production advantage for Germany because they have this big production stack,” added Longva.
Ongoing French risk
French nuclear availability was set to average 48.7 GW or 79% of full capacity for the rest of the year, above levels in the past two years, according to outage data. Yet, problems with cladding at some nuclear units puts this figure in doubt.
Temperatures this winter would be a key factor in France determining fuel and power demand as well as net flows in the region, due to the country’s reliance on electric heating, said the sources.
“It’s always a risk. End of November, early December could be very cold, with these high prices it could go anywhere basically,” said one trader at a utility.
Spiking carbon and fuel costs have consistently pushed the German power curve contracts to record highs this month.
France could possibly out-turn at extremely high spot levels, as seen in the UK already with prices over GBP 1,750/MWh, added the trader. “We’re in territory we haven’t seen before.”
However, German supply would also tighten as 1.5 GW of hard coal and 0.9 GW of lignite-fired capacity are scheduled to leave the market in December under a national phase-out plan. In addition, three nuclear reactors with a combined capacity of 4.1 GW have to leave the market by end-December amid the country’s nuclear exit.
Reduced hydropower
Limited hydropower stocks across Europe this winter further curbs the overall supply picture and could expand import requirements from countries bordering Germany.
“Nordic reservoirs are a lot lower than normal and that in combination with low gas storage in other countries limits flexibility of the grid,” said Harreman.
Norwegian hydropower reservoirs were last 66% full or 17 percentage points under the norm, while French stocks were 6 percentage points below at 71% full, showed data from Montel’s Energy Quantified (EQ).