The Nordic hydro balance started the year in a big deficit, following a 2018, where long periods with dry and warm weather, combined with high consumption, added pressure on the Nordic hydro power producers. Early 2019, the deficit increased and according to analyst agency PointCarbon, it peaked at around 22 TWh at the end of January.
During February and the first half of March, the deficit has decreased sharply however, due to a significant change in weather. Mild and wet conditions have dominated the Nordic area for one and a half month now, and have caused an improvement on the hydrological situation. During this period, the hydro balance has improved by as much as 16 TWh, and PointCarbon now estimates it in a deficit of just 6 TWh.
While the hydro power producers could raise prices earlier this year, they have had to lower them again recently. As the weather forecasts for the remainder of March remain mild, nothing suggests that the winter is going to return to the Nordic area anymore this season.
The fast improvement of the hydro balance has greatly influenced the development on the Nordic power market, which at this time of the year reacts sharply to big hydrological changes. On the forward market, the coming quarter contract, Q2-19, has dropped by almost 20 % since the end of January. Meanwhile on the spot market, prices have fallen since February, and week 9 and 10 have been the cheapest weeks on the spot market since October last year, with an average system price of 41.87 EUR/MWh and 42.55 EUR/MWh respectively.
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The weather forecasts for the Nordic region predict large precipitation volumes for the coming weeks. The hydro-balance is improving and the electricity prices are therefore falling.