Grupo ASE | The upward trend in electricity prices began last summer. This is mainly due to the rising costs of gas and CO2 emissions. However, analysts at Grupo ASE describe the increase recorded so far in February, of nearly 200% year-on-year, as extraordinary and point to wind energy, which has been well below its historical averages. They explain that the growth of renewables means that weather conditions increasingly impact the evolution and volatility of electricity prices.
Up until February 19, wind production has decreased by 40% compared to last year. It has averaged 121 GWh/day, which is 56% less than its average for a February over the past five years.
Additionally, this lower wind contribution to the system has been accompanied by a notable increase in electricity demand (2.8%) and exports to France and Portugal (82%). These two circumstances have forced a 5.5% increase in electricity generation in Spain.
The largest amount of electricity demanded has come from the growth of hydropower (51.1%), combined cycle gas (40%), and photovoltaics (29.3%). Among these three technologies, hydropower and combined cycles have benefited from the absence of wind energy. Without its pressure (wind usually offers at zero), they have been able to raise their bidding prices.
According to analysts at Grupo ASE, the average hourly electricity price until the 19th skyrockets to nearly €200/MWh during hours without solar generation.
European gas reserves are 20 points lower than last year.
The uncertainty in the European gas market continues to rise as inventories have fallen to 44.71% by mid-February, 20 percentage points less than a year ago. As the market already anticipates that this year Europe will need to import more liquefied natural gas (LNG) to address higher gas consumption and declining inventories, pressure on prices is increasing.
In the TTF, the reference market in Europe, the daily gas price stands at €50.61/MWh so far in February. This is 100% more expensive than in February of last year. Additionally, it is the highest level since February 2023 (€53.72/MWh).
Colder temperatures, limited wind generation, and falling gas inventories are driving this market at the beginning of 2025. The Spanish spot price (MIBGAS) averages €53.09/MWh in February, with an increase of 113.8%.
Analysts at Grupo ASE warn that gas prices are starting to reach a level that harms European industrial demand. This could lead companies to reduce their gas consumption, as happened during the crises of 2022 and 2023.
Electricity futures correct downward.
The upcoming contracts for electricity prices in 2025 have experienced a significant cut, ranging from 5% to 8%. The Yr-26 has also recorded a notable reduction, down to €61.91/MWh. Thus, the Spanish market maintains a discount premium of €28/MWh over the German market.
This downward correction is due to the decrease in CO2 emission prices (EUA), which have fallen by almost 10% so far in February, down to €75/tCO2.
