Introduction
The growing role of wholesale traded energy markets across Europe creates a greater need for players throughout the value chain to be aware of the latest market movements and developments. From the wellhead or power station gate to the end-user, volatility in the spot and forward price of power and gas is creating an increasingly challenging environment for all market participants.
Scope
An examination of the wholesale gas price trends in Europe's three key markets - the UK NBP, the Zeebrugge Hub and the Dutch TTF. An assessment of traded power prices in the UK, Belgian, Dutch, German and French wholesale power markets. Insight and analysis into the impact of wholesale markets on the wholesale / retail price interface.
Highlights
Electrabel's new plant build programme is set to bear fruit. The UK and Spain will lock horns with the US for Atlantic LNG. French new entrants face uphill struggle to break EDF's stranglehold.
Reasons to Purchase
Establish the current level of wholesale and retail energy prices and the fundamental drivers behind movements in the traded value of gas and power. Understand how wholesale pricing impacts different facets of the value chain, identifying the potential to limit risk through hedging strategies. Forecast future developments in the traded price of gas and power in order to successfully take advantage of arbitrage opportunities.
DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 2
Electrabel's new plant build program is set to bear fruit 2
Electrabel new plant builds are astutely spread across NW Europe 2
Gas plant offers a strong seasonal hedge in Electrabel's heartland 3
Electrabel's investment in Dutch generation capacity is prudent 4
Weaker German generation spreads still point toward coal builds 5
Hydro stock builds will play a secondary role in carbon price dynamics 6
Western Europe's hydro outlook has notably improved in 2007 6
Recovering Spanish reserves offer downside to carbon prices 7
EU policy makers will continue to drive carbon market sentiment 8
The UK and Spain will lock horns with the US for Atlantic LNG 9
Rising LNG usage will inevitably converge UK and US gas prices 9
Spain still has a significant role to play in the Atlantic LNG market 10
French new entrants face uphill struggle to break EDF's stranglehold 11
EU investigates regulated French tariffs as a barrier to competition 11
Poweo mounts customer acquisition challenge as market opens 11
Poweo faces an uphill struggle to break French customer loyalty 12
French industry enjoys an energy price advantage over its peers 13
French industrial supply offers little or no margin to new entrants 14
European gas storage outlook is extremely positive ahead of the winter 15
UK storage injections are significantly ahead of the game 15
French stocks appear healthy in the event of a tight UK winter 16
Northwest European wholesale power prices continue to plateau 17
Belgian prices remain strong, despite a drop in quarterly contracts 18
Short and longer-term French baseload price trends diverge 19
German near curve prices decline as heat wave fails to materialize 20
Dutch power prices characteristically track the German market 21
UK power traders indifferent to severe weather warnings 22
Europe's key wholesale gas markets gripped by summer lull 23
Bearishness returns to the NBP after supply-side woes subside 24
Dutch gas prices mirror bearishness sentiment at the NBP 25
Belgian gas prices mirror movements at the influential NBP market 26
APPENDIX 27
This brief builds upon Datamonitor's extensive pricing proposition 27
Glossary 28
This brief contains a number of industry standard terms 28
Our analysis builds on other sources to provide greater insight 30
Further Reading 30
Extended Methodology 30
We assess the profitability of fossil fuel plants across northwest Europe 30
Our bespoke services can be tailored to your specific needs 31
Ask the analyst 31
Datamonitor consulting 31
Disclaimer 31
List of Figures
Figure 1: Electrabel's upstream investments are sensibly hedged to secure generation margin across varying markets and different fuel types 2
Figure 2: Belgian coal plants will ultimately deliver more profitability than gas generation in Electrabel's incumbent power market 3
Figure 3: While coal-fired plants prove the most profitable generation type in the Netherlands, gas also delivers positive margins out to 2010 4
Figure 4: German generation margins are lower than in the Benelux markets, but dark spreads maintain relative attractiveness over gas 5
Figure 5: Western Europe's key hydro stocks have all notably improved on their H1 2006 position 6
Figure 6: French and Nordic reservoir levels follow a distinct pattern, while Spanish hydro stocks continue to recover from draught conditions 7
Figure 7: National Allocation Plans exert a far stronger influence on the value of carbon compared to short-term fundamentals such as weather 8
Figure 8: Market fundamentals continue to drive sentiment during the peak demand winter period, but summer price convergence is likely 9
Figure 9: Although long-term bookings dominate Spanish LNG allocations, significant terminal capacity is available for 'spot' cargoes 10
Figure 10: In France, the propensity to switch power supplier in both industry and households is among the lowest in Europe 12
Figure 11: Liberalized power markets have seen retail prices climb above regulated tariffs as rising commodity prices are fully passed through 13
Figure 12: Gross margin is non-existent for entrants securing forward power in France, before additional delivery costs are even considered 14
Figure 13: With 2005/06 injection trends implying Rough will be full by Aug-07, it will only remain for the UK's medium-sized facilities to be filled 15
Figure 14: Excess stored gas in the import-dependent French market could be exported via the Interconnector in the event of a cold UK winter 16
Figure 15: Northwest European wholesale power prices continue to plateau 17
Figure 16: Belgian annual and monthly forward baseload power prices held firm in June 07, while the quarterly contract begins to slip back 18
Figure 17: French near curve power prices come under downward pressure from mild seasonal fundamentals, but the far curve remains bullish 19
Figure 18: Quarter ahead German baseload contracts witnessed a steep decline as trader expectations of a summer heat wave subsided 20
Figure 19: The Dutch power market mirrored neighboring German prices, witnessing losses In the month ahead and year ahead contracts 21
Figure 20: UK near and far power curve trends diverged only marginally in Jun-07, as severe flooding failed to significantly impact market sentiment 22
Figure 21: NW Europe gas markets reversed recent gains across the board 23
Figure 22: UK wholesale gas prices returned to their underlying downward trend in June 2007 after unplanned North Sea outage fears dispersed 24
Figure 23: The TTF gas market slipped downwards as both the prompt and far curve retraced the bullishness seen in May 2007 25
Figure 24: The Bacton-Zeebrugge Interconnector ensures strong price linkage between the EU's largest wholesale gas market and Belgium 26
Figure 25: Energy pricing proposition 27
Figure 26: Generation spread methodology 30