Insights Energy Market Update October 2023
Energy with insight | Page A
Geopolitical tensions on the rise and gas prices are following suit.
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Irish Wholesale Power Prices Average prices in the SEM Day Ahead Market (DAM) increased 13% month-on-month in October 2023. The monthly average price was €126/MWh, compared to €112 in September. Although the general trajectory in Irish power prices has been downward moving in 2023, we have now seen that average power price tick upwards for the last 3 months in a row, as we head into deep winter.
Historic Day Ahead SEM (€/MWh) Monthly Average DAM €/MWh 400 350 300 250 200 150 100 50
3
3 S
N
ep
ov
-2
-2
3 M
O
M
ay
ct -2
ar -2
2
2 -2
1 D
Ju
Fe
ec
b-
l2
-2
1
21
0 S
A
N
ep
pr -2
-2
0
-1 9 ov
n19 Ju
Ja
n19
0
Historic Day Ahead Prices 2023 (€/MWh) 250
200
150
100
50
23 1/ /1 01
01
/1
0/
20
20
02 01
/0 9
/2
/2 /0 8 01
23
3
3 02
3 /0 7/ 2 01
/2 /0 6 01
02
02
02 01
/0 5
/2
/2 /0 4 01
3
3
3 02
3 02 01
/0 3
/2
/2 /0 2 01
01
/0 1
/2
02
02
3
3
0
Energy Market Update | Page 3
Gas - Pricing and Supply Near curve gas prices have been on a general upward trend since mid-July. That upward pressure increased in October, as violence erupted in the middle east. There was also an explosion on the undersea Baltic-connector gas pipeline that led to allegations of sabotage in October. After the initial price spike related to the two above developments, gas prices settled somewhat, reflecting the current comfort around key the fundamentals of gas European storage and demand.
NBP Spot V Month +1 (GBp/th) From beginning of war in Ukraine 700 600 500 400 300 200
02 27 2 /0 7/ 20 25 22 /0 8/ 20 26 22 /0 9/ 20 25 22 /1 0/ 20 23 22 /1 1/ 20 22 22 /1 2/ 20 25 22 /0 1/ 20 23 23 /0 2/ 20 24 23 /0 3/ 20 26 23 /0 4/ 20 30 23 /0 5/ 20 28 23 /0 6/ 20 23 27 /0 7/ 20 25 23 /0 8/ 20 23 26 /0 9/ 20 23 25 /1 0/ 20 23
2
/2
02
2
28
/0 6
/2
26
/0 5
/2
02 26
/0 4
/2
02 /2
/0 3 24
/0 2 23
02
2
3
100
NBP Price Assessment Day-Ahead - GBp/th
Energy with insight | Page 5
Natural Gas NBP Month +1 GBp/th
Energy Market Update | Page 6
Gas Price Spike followed by relative market calm Were it not for European gas storage sites being virtually full now, and the forecasts that recent decrease in gas demand set to hold, we could have expected the below incidents to have a stronger and more prolonged impact on near curve gas prices.
NBP month ahead prices October 2023 (GBp/th) 150
140
8th October explosion on Baltic connector pipeline
130
120
110
7th October Hamas launch attack on Israel
100
90
23 20
23 0/ /1 30
/1 28
26
/1
0/
0/
20
20
23
23 20 /1
24
0/ /1 22
0/
20
20 0/ /1
Natural Gas NBP Month+1 GBp/th
Energy with insight | Page 6
23
23
23 20
/1 18
0/ /1 16
0/
20
20
23
23 20 /1 14
0/ /1 12
0/
20
20 10
/1
0/
0/ /1 08
23
23
23 20
23 20 06
/1
0/
0/ /1 04
02
/1
0/
20
20
23
23
80
Gas; Consumption and Storage Gas Storage Aggregated European storage sites were reported to be 99% full on 31st October. This is giving the market a great deal of comfort as we head begin the coldest months of the year.
Gas Demand On the demand side, although German gas demand was seen increasing slightly year-on-year in October, average demand is still well below the 5-year trailing average now. Energy industry experts have suggested recently that they feel that some of the gas demand reduction since the beginning of the 2021/22 energy crisis will be permanent, as many industrial players have switched processes and behaviors to adapt to a world of higher gas prices.
Energy Market Update | Page 7
Energy with insight | Page 8
Renewables Wind generation contributed an average of 30% of the Irish Generation Mix in October. This is a lower return than in the previous two October periods which averaged 41% across both.
3
3 O
ct
ug
/2
/2
23 n/
A
A
Ju
b/
pr /2
3
23
2 Fe
D
O
ct
ec
/2
/2
2
2 /2 A
A
Ju
ug
n/
pr /2
22
2
22 b/ Fe
D
O
ct
ec
/2
/2
1
1
Renewables v Demand
As usual, the Day Ahead market was lower when the wind was blowing throughout the month, see graph left, but the upward trend in gas prices pushed the average DAM higher for the third month running.
23 20
23 0/ /1 31
29
/1
0/
20 0/
27 /1
20
23
23 20
23 0/ /1 25
/1 23
/1
0/
0/
20
20
23
23 21
19
/1
0/
20 0/
17 /1
20
23
23 20
23 0/ /1 15
/1 13
/1
0/
0/
20
20
23
23 0/ 11
/1
0/
20 09
07 /1
20
23
23 20 0/
/1 05
0/ /1 03
01
/1
0/
20
20
23
23
Day Ahead SEM v NBP Spot v Wind Generation October 2023
Energy Market Update | Page 9
Generation Capacity Grid outages were down month on month and dropped significantly toward the back end of October.
Average Outages (MW)
Energy with insight | Page 10
Energy Market Review | Page 11
Geopolitical Turmoil v Market Fundamentals Negatives/Risks The terrible conflict that has flared up in the Middle East during the month has put markets on high alert. Any further escalation will surely send gas prices higher. Especially if that war spreads to threaten key infrastructure such as the Suez canal. Coupled with questions of sabotage around an explosion on a gas pipeline connecting Finland and Estonia under the Baltic Sea during the month, gas prices looked to be on a serious upward trajectory in the first half of October.
Positives/Supports The good news for gas prices now is that key fundamentals such as high storage levels and lower than average gas demand are looking particularly positive, and supply of LNG and Norwegian pipeline gas looks reasonably assured for the foreseeable future. These conditions have helped to bring gas prices back down since the highs of mid month.
Conclusion Gas market fundamentals are strong and, in many ways, European power prices are in a better position than last winter. However, volatility in gas prices is here to stay, for the foreseeable future.
Energy with insight | Page 12
Energy Market Review | Page 13
12 Month Forecast – Power Forward Prices Notwithstanding weekly movements, up or down, our 12-month forward price estimate has remained consistently around the €150/MWh point for over 6 months now. That €150/MWh mark was clearly breached during October, but the average came back down later in the month. Counteracting forces, such as the resilience of EU gas storage sites versus the uncertainty around global LNG supply have stopped the future price of power from straying too far from its current position. Forward prices are still approximately 2.5x the previously accepted norms.
Energy with insight | Page 14
12 Month Forward Power Prices - €/MWh (Monthly Averages)
12 Month Forward Power Prices - €/MWh September 2023
Energy Market Review | Page 15
12 Month Forecast – Pinergy Risk Matrix Understanding the Pinergy Risk Matrix. We have compiled a list of the key factors we feel have the highest potential to influence power prices over the coming 12 months and rated as follows: Green = Price reducing impact and highly probable. Amber = Risk of increased power prices and of lower concern. Red = Significant risk to 12 month forward price outlook, with medium to high probability. The risk of increasing prices has ticked up in Q4 2023, as an already fragile energy market reels from geopolitical tensions.
Demand The EU have persisted with demand side reduction in power and gas usage and the results are evidenced by a reduction in average gas consumption on the continent in 2023. Positive
Nuclear & Hydro French nuclear and Norwegian hydro power stations are reported to be in good standing ahead of Winter. These are two key inputs to the European power grid. Positive
Energy with insight | Page 16
Geopolitical Situation Renewed war in the Middle East, combined with ongoing war in Ukraine, brings a high level of uncertainty now. Negative
Gas Storage EU aggregated gas storage sites were reported to be almost 100% full, ahead of the coldest part of Winter. Positive
Competition for LNG coming from Asia and Europe’s exposure to spot LNG markets. Carries price premium
Availability of LNG After gas price increases across the last few months in Europe, continuing volumes of LNG shipments from the US appears to be assured, for the near future at least. Positive
Energy Market Review | Page 17
Notes
Energy with insight | Page 18
Energy Market Review | Page 19
Tadhg Gunnell Director of Markets, Risk and Regulation
Nathan O’Sullivan Financial Analyst - Energy Markets
Suite 1, Beaver House, Beech Hill Office Campus, Clonskeagh, Dublin 4, D04 Y8X5
pinergy.ie
The contents of this report are provided solely as an information guide. The report is presented to you “as is” and may or may not be correct, current, accurate or complete. While every effort is made in preparing material for publication no responsibility is accepted by or on behalf of New Measured Power Limited T/A Pinergy for any errors, omissions or misleading statements within this report. No representation or warranty, express or implied, is made or liability accepted in relation to the accuracy or completeness of the information contained in this report. New Measured Power Limited t/a PINERGY reserves the right at any time to revise, amend, alter or delete the information provided in this report. Energy with insight | Page A