Carbon breaks away from sideways trend and German electricity weighed by low demand

 Carbon Quotas

The benchmark contract for EUAs (Dec 24) has experienced some volatility in the last three weeks.  For a moment, momentum turned from bearish to modestly bullish, breaking away from its previous sideways trend of EUR 55-62/t -  as prices peaked at 65.78/t on the 25th of March. 

The increase could be explained by rising gas prices following attacks on a Ukrainian gas storage facility executed by Russia, and the Easter break disrupting supply as no EEX auctions were held on Good Friday or Easter Monday. However, analysts say that the sharp increase was tied to a short squeeze on the positions held by "speculators". 

On the 3rd of April, the Dec 24 contract was down to EUR 57.21/t on the Ice Index, which is the lowest since the 14th of March. Prices are currently below the EUR 60/t zone where it is expected to stay due to downward pressure caused by milder winter temperatures and high gas supplies. This leads to weaker gas prices and coal-to-gas fuel-switching, which results in lower demand for EUAs. 


German Electricity

Since our last update, the front month April contract was trading in the range 58-62 EUR/MWh until a dip on the 8th of March before trending higher until demand collapsed over the Easter weekend on the 28th of March.

According ot Montel’s Energy Quantified (EQ) demand should drop from 53-54 GW on regular weekdays, to 41.6 GW on Good Friday and 38.2 GW on Easter Monday.

Wind power output stayed at normal levels throughout the Easter weekend, and solar power output remained strong, leaving the way for demand to steer the ship.

On another note, German utilities are shutting down coal plants as scheduled in their 2030 phase out of coal to reduce GHG emissions. Germany’s RWE and LEAG shut down plants with a total capacity of 3.1 GW on Sunday 31st.

The front month contract has traded sideways the last week amidst milder temperatures, lower demand, strong wind output throughout the whole of Europe and heating season coming to a halt. There seems to be few drivers for the power price to be rising short-term given the strong fundamentals and low demand.


References:

https://montelnews.com/news/2316308c-7260-41a0-bf33-1c0a2b9a9f63/end-of-day-carbon-rises-to-2-week-high-on-gas-surge 

https://montelnews.com/news/7ba306e5-870b-4e22-b859-56fd54d90b2f/end-of-day-carbon-pulls-back-from-2-month-high

https://montelnews.com/news/e982d18e-8b7e-4779-842d-614f8b7317d9/german-power-prices-trade-flat-amid-lack-of-drivers

https://montelnews.com/en/news/7e931b86-f040-4063-b535-70e97d37b11e/german-high-wind-low-demand-to-pressure-spot-power

Kommentarer

Legg inn en kommentar

Populære innlegg fra denne bloggen

The EU Carbon market prices - historical and future outlook

Bilde
The EU carbon market The EU carbon market consists of carbon allowances that energy-intensive sectors need to buy to compensate for their greenhouse gas (GHG) emissions. This market is known as The EU Emissions Trading System (EU ETS). Currently, the economic actors mandatory for participating in this trading system are the power, industry, aviation, and from 2024 the maritime sectors. One European Emission Allowance (EUA) gives the holder the right to emit 1 tonne of CO­­­­­­­­­­­­ ­­­ 2 and is quoted in EUR, effectively putting a price on the emission of 1 tonne of CO 2 . Historical prices - timeline The graph shows the historical prices of an EUA since its launch in 2005. Uncertainties and a generous free allocation of allowances led to a slow start with prices hovering around 5-25 EUR/t. A trading collapse in 2006 saw prices drop to near zero due to excess allowances. The prices then stabilized below 20 EUR/t, before a gradual incline began in 2018. Significant market reforms int...
Les mer

Carbon slides sideways while German power expected to fall

Bilde
Policy changes The RePowerEU is a policy change intended to reduce Europe's reliance on energy imports from Russia. As a consequence of this policy change, additional EUA's were auctioned to the market in an effort to raise funds (20 bn EUR) to finance projects, enhance energy diversifying initiatives and increase renewable energy sources. Thus, the RePowerEU is an initiative to both de-risk energy and geo-political issues with respect to Russia, but also to make way for a greater ratio of renewables in to Europe's energy mix. However, not everyone sees this as a positive factor for the Carbon Markets. Markus Krebber, head of German energy company prescribes the recent fall in EUA's  to the additional auctioning coming from the RePowerEU and he states that this will cause a downward spiral that ultimately will jeopardise the European Emissions Trading System. The European Commission assumed an average carbon price of EUR 75/t to deliver the funding target of 20 bn EUR f...
Les mer