Vattenfall's Nordic hedge protects again hydro-induced power price crash

London — An unusually high hydrological balance pushed Nordic electricity prices down in January-September, but hedging mitigated the impact on Vattenfall's achieved price, the Swedish state utility said in a results statement Oct. 27.

Hedging of Vattenfall's Nordic production resulted in an average achieved electricity price of Eur31/MWh ($36.60/MWh) in January-September compared with Eur32/MWh a year earlier.

Nordic hydro reservoirs have been at or above 88% content for the last three months, Nordic spot system prices averaging just Eur8.90/MWh in Q3.

Profit for the period decreased 86% to SEK2 billion ($230 million) mainly as a result of Q2 impairments made to Vattenfall's Moorburg coal plant (impaired by SEK9 billion) and its wind business (Swedish and Danish onshore assets impaired by SEK1.5 billion).

Coal crushed

Vattenfall President and CEO Magnus Hall said coal-fired power "is not competitive at today's price levels for electricity, fuel and CO2 emissions."

"This is not surprising, as pressure is being exerted by both political measures and by technological development of renewable production. In Germany we are now participating in an auction to handle the closure of the Moorburg coal-fired power plant in Hamburg," he said.

The result of the tender is to be announced Dec. 1. at the latest and is subject to approval under EU state aid rules. Other alternatives for the plant continue to be evaluated, Vattenfall said.

Nine month electricity production of 82.2 TWh was down 13.2 TWh year on year as reduced fossil and nuclear output more than offset higher hydro and wind output.

Decreased production was due to closure of the Ringhals 2 reactor at the end of 2019, closure of the Hemweg 8 coal plant in the Netherlands, prolonged annual outages and down-regulation in nuclear, Vattenfall said.

Nuclear future

The utility noted the emergence of more flexible nuclear generation to cope with volatile market conditions, with 3 TWh of down-regulation this year and a deal with Swedish system operator Svenska Kraftnat for an earlier restart of Ringhals 1 during the summer.

Nuclear had "a strategically vital role in the current and future energy system in Sweden," the utility said, noting the source was "cost competitive in a merchant price-based market and an enabler of a fossil-free future."

As well as providing system control services such as voltage control, inertia and short circuit capability, nuclear was "well-equipped" to support CO2-free production of power-to-X commodities such as hydrogen, ammonia and jet-fuel, it said.

In September Vattenfall said it was considering operating its Forsmark and Ringhals reactors until 2065, extended from 2040 and 2045 closure dates.

Neither had Vattenfall ruled out new nuclear build, Torbjorn Wahlborg, head of Vattenfall's generation division, said during a webcast Sept. 23. One could imagine the next government being more positive to nuclear power," he said. "Public opinion is quite positive to nuclear power."

Vattenfall operates Forsmark-1, -2 and -3, with a combined capacity of 3.388 GW; and Ringhals-1, -3 and -4, with a combined capacity of 3.224 GW. Ringhals-1 is scheduled to be permanently shut at the end of 2020.