According to the European Commission report on the performance of the electricity market in the EU for the first quarter of 2019, the main trends in the functioning of the market were the increase in the share of natural gas in electricity production due to falling prices for this energy, reduction of wholesale price of electricity due to milder weather conditions in March and February in 2019, lower prices for energy products and higher generation of RES, primarily wind power.
There was a 2% reduction in electricity consumption across the EU, mainly due to favorable weather conditions and slowdown in industrial production. However, most EU Member States recorded economic growth in the first quarter of 2019.
According to the document, spot coal prices have decreased by 30% to EUR 53.24 per metric ton due to the accumulation of maximum reserves of this energy source at warehouses in Dutch transshipment points (Rotterdam). Natural gas prices declined mainly due to additional volumes of pipeline and liquefied gas against the backdrop of falling demand in Asia, stimulating an increase in the share of gas thermal power plants in electricity production.
The CO2 emission permits market showed a 14.3% fall in spot prices for the first time, where the main reason was the situation around the so-called Brexit and a lack of understanding of the UK’s further involvement in the EU emissions trading system. Notwithstanding such price reduction, its level remained almost twice as high as in March 2018, stimulating a further decrease in coal consumption in electricity production.
Thus, the share of coal in the consumption of thermal generation has fallen by 19.2%, in particular, most noticeably in the segment of energy coal, while brown coal due to lower costs per unit of produced electricity has better maintained its market position. Despite further cuts in consumption, Russia has been able to increase its energy exports to the EU, reaching 54% of its total imports over the last four years.
The weighted average electricity price at the EU wholesale market was EUR 48.9 per MWh, with member states with higher RES volumes having mostly lower prices, for example, EUR 40.9 per MWh in Germany, EUR 42.9 per MWh in Denmark. In Italy, the Balkans and the Iberian Peninsula, prices were higher due to the lower intensity of hydroelectric power plants in view of low rainfall.
The total amount of electricity generated by renewable energy source objects reached 31% of the total balance, with the clear advantage of the combined use of sun, wind, biomass and hydroelectric power. Thus, the reduction of hydroelectric production due to the decrease in precipitation was restored by an increase in wind power plants, the share of which reached 16% in the first quarter of 2019. Wind generation was the main driver of negative prices in the wholesale electricity market in March 2019, mainly in Germany and several neighboring countries.
The Western European region (Austria, Belgium, France, Germany, the Netherlands and Switzerland) has consolidated its position as the largest electricity exporter with a significant supply of generating capacity, the most competitive prices and extensive infrastructure. During the first quarter of 2019, net exports amounted to 22.5 TWh of electricity, with RES and French nuclear power plants as major suppliers. Due to low rainfall, the Nordic region was forced to increase electricity imports from the Russian Federation, in particular, Finland and the Baltic countries increased their purchases by more than 50%. The Central European region remains the net importer of electricity, with about 2.2 TWh of electricity purchased in the first quarter of 2019. The demand for imports is mostly shaped by peak consumption periods, although prices fell from EUR 75 per MWh to EUR 42 per MWh in January-March, while the cost of electricity in the base load dropped from EUR 65 per MWh to EUR 38 per MWh. The availability of cross-border electricity transmission infrastructure has become a major tool for lowering prices in the unstable mode of operation of national energy systems and emergency shutdowns of large generation facilities.
Therefore, the European Commission’s report on the state of the electricity market as of the first quarter of 2019 shows a steady trend towards increasing the share of RES in aggregate generation, which, in combination with high prices for the purchase of CO2 emissions permits, continues to displace coal. At the same time, the combined development of different types of RES has led to a decrease in wholesale electricity prices in a number of EU Member States. There is a tendency towards energy deficiency in Central Europe.
An important aspect of the functioning of the market is also the increasing role of cross-border flows through which the Central European region has shown a decrease in wholesale electricity prices and secured reliable energy supply even in the case of emergency shutdowns at the NPPs of Slovakia and Hungary. It is obvious that Central Europe needs high-maneuverability to balance its own energy systems, and such services may be in demand in the near future.
