Central European spot prices strengthen on rising demand

Warsaw — Baseload day-ahead prices on the Polish Power Exchange (TGE) rose more than 13% in week 1 due to low wind generation. Spot prices on Jan. 7 closed at Zloty 281.28/MWh (Eur62.27/MWh) up from Zloty 248.08/MWh on Jan 4, exchange TGE said. Wind generation on Jan. 7 fell to lows of 0.3 GW.

"Spot prices were quite low at the beginning of the week but they moved slightly higher due to low wind in Poland. Today and tomorrow Poland will export power to almost all of its neighbors," one trader said.

In comparison, the average spot price in December was Zloty 258.00/MWh, TGE said Jan. 7, up from Zloty 251.66/MWh in November.

The front-month February contract fell 1% to Zloty 250.41/MWh on Jan 7, perhaps influenced by reduced wind output, the trader said. He said healthier production was expected from the beginning of next week.

Despite the reintroduction of new coronavirus restrictions from Dec. 28, which saw most stores in shopping centres close again, power demand reached 24,876 MW on Jan. 7, transmission system operator PSE said, up 0.6% year on year.

Looking further out, the Cal-22 contract was boosted in December by higher carbon prices, but was more or less flat during the first week of 2021, ending at Zloty 259.48/MWh on Jan. 7. In comparison, the average Cal-22 contract price in December was Zloty 251.75/MWh, up 5% month on month.

Poland was an importer of electricity from Lithuania, Sweden, Germany and the Czech Republic as per usual, apart from on June 7, when it exported between 300-500 MW to those countries.

The average price of green certificates, used to support existing renewable energy installations, was up 0.3% week on week to Zloty 142.70/MWh on Jan. 7.

Czech prompt, curve diverge

Czech power prices diverged in early January as spot prices rose strongly on recovering demand while futures continued to slide.

DA spot prices on Prague's OTE market surged at the start of the year with baseload and peak prices almost doubling over the period. Baseload prices continued to firm Jan. 8, climbing 8.79% to Eur74.69/MWh, peak contracts rose 13.5% to Eur93.75/MWh, with offpeak prices up a modest 1.68% to Eur55.64/MWh. Spot prices had flattened out at much lower levels at the end of December with baseload around Eur44/MWh, peak power around Eur51/MWh, and offpeak at Eur36/MWh.

Data from high voltage grid operator CEPS showed demand recovering strongly from the start of the year with the midday gross hourly grid load firming steadily to around 10,800 MW Jan. 6 from around 8,600 MW on Jan 2.

CEPS' weekly evaluation at the end of December showed gross demand 11.9% higher YoY despite higher than average temperatures. The previous week, demand had been 4.2% higher. Daily power production profiles showed coal-fired production at the margin, squeezed by higher carbon prices and as five of CEZ's six nuclear units, including both Temelin reactors, providing stable baseload power.

Futures drifted lower across the board with front month and year contracts being traded at a slight premium. Front month contracts on Prague's Power Exchange Central Europe slipped Jan. 6 to Eur51.84/MWh from Eur52.13/MWh after peaking at Eur57.62/MWh on Dec. 28. March contracts fell to Eur47. 94/MWh from Eur48.32/MWh. Front quarter contracts eased to Eur44.04/MWh from Eur44.32/MWh. Q3 prices fell to Eur47.44/MWh from Eur47.7/MWh. Cal-22 baseload contracts eased to Eur51.85/MWh from Eur51.90/MWh while Cal-23 prices were at Eur51.73/MWh.

OTE, the DA and intraday power market operator, said 2020 trading volumes were 7.8% higher at 26.85 TWh versus 24.91 TWh in 2019. The rise stemmed from a sharp rise in intraday trading at 4.44 TWh versus 1.11 TWh in 2019. DA trading fell to 22.41 TWh from 23.79 TWh.

Hungarian supply position solid

Hungarian day-ahead power prices started out hectic and high but soon reverted to a normal seasonal pattern over the holiday period, with minor domestic supply issues mitigated by ample import capacity.

Day-ahead base on the HUPX exchange was volatile and spiked as high as Eur103/MWh in the ten days before Christmas, but spent the rest of the holidays and the turn of the new year around the more reasonable Eur35-Eur40/MWh range.

It rose back above Eur50/MWh as the country was back at work in week 1, ending just below Eur75/MWh. The gap to German spot prices was likewise wide and volatile at the outset -- complicated by strong wind generation in Germany -- but narrowed significantly by weeks 53 and into 2021, with Hungarian prices actually being the lower of the two on most days.

Supply and demand conditions were not nearly as volatile as price movements indicated. Weekly gross power consumption was high but in line with the seasonal norm in week 51, falling by 15%-20% as usual for the holidays, shaped also by milder-than-usual weather during Christmas. It rose back to normal in week 1 of 2021, especially as the weather was set to turn colder again.

On the supply side, domestic generation was largely stable, dominated by nuclear and gas-fired plants as solar and wind generation remained sporadic. Changes in net imports covered all the shift in domestic demand; in weeks 53 and 1, this was supported by a jump in net imports from the Balkans, thanks to strong hydro and wind generation there.

Futures prices on the HUDEX exchange showed an up-and-down pattern throughout the period, moving higher overall before the switch to new front contracts at the turn of the year.

Month-ahead base ended at Eur61.8/MWh, with the gap above German month-ahead prices settling near Eur10/MWh. Quarter-ahead base breached Eur60/MWh for Q1 contracts, while Q2 contracts closed at Eur48.9/MWh. Year-ahead base crept upward throughout, even after the switch to Cal-22. It closed at Eur56.6/MWh, for a premium of Eur6/MWh over German Cal-22 quotes.