Power prices soared on bullish gas market while EUAs took a breath

The European power spot prices observed limited changes yesterday as hefty wind production kept most prices under the clean coal costs while the French followed once again a different path and slightly increased, buoyed by higher clean gas costs which offset the forecasts of weaker power demand. The day-ahead prices averaged 174.80€/MWh in Germany, France, Belgium and the Netherlands, -2.56€/MWh day-on-day.

Supply fears and subsequently soaring gas prices continued to lift the power curve yesterday, the largest gains being posted by the short-term contracts. The French Q1 23 climbed by 20.26€/MWh to record 551.17€/MWh as worries over plummeting nuclear availability provided additional support to the country’s prices. Conversely, the Spanish prices lived their own lives and only slightly rose as soon-to-voted 50€/MWh gas price cap pressured the market compared to its neighbors.

The carbon prices inched down on Thursday after a day of narrow and rangebound trading as the market took a breath in the aftermath of Wednesday’s significant volatility. The EUA Dec.22 closed at 88.29€/t, -0.57€/t from Wednesday’s settlement. Numerous market participants are expecting limited moves on the carbon market until the ENVI Committee vote on the ETS revision proposals and CBAM which could spur some volatility next week as several reports emerged that an alliance of MEPs formed within the environmental committee intends to push for stricter reforms compared to the Commission’s proposals and likely amendments to limit speculator participation in the EU ETS.

On the policy side, the EU published the Total Number of Allowances in Circulation (TNAC) for 2021 yesterday after market’s close. According to the Commission, the market’s surplus of allowances hence amounted to 1 449mt at the end of last year, a 130mt (-8.2%) decrease from 2020. As a consequence, 347m EUAs will be withdrawn by the MSR from the auction volumes scheduled to be sold between September 2022 and August 2023.