5.1.2 Economic environment

5.1.2.1 Market prices for electricity and the principal energy sources

In an interconnected European market, analysis of market prices in France and the rest of Europe provides important context.

Spot electricity prices in Europe were lower in 2019 than 2018.

5.1.2.1.1 SPOT ELECTRICITY PRICES IN EUROPE⁽¹⁾

The comments below concern baseload prices.

In France, average spot electricity prices for 2019 stood at €39.4/MWh (baseload) and €46.3/MWh (peakload), respectively €10.7/MWh and €12.8/MWh lower than in 2018. The primary explanation for this decrease is the lower coal and gas prices over the last three quarters of the year, partly offset by higher CO₂ prices. Wind and solar power output was also up compared to 2018.

The downward trend in spot prices began at the end of the winter, when temperatures were well above normal in contrast to the previous year’s late cold spell. Between June and December, the decrease observed in spot prices was €20/MWh more than in the corresponding period of 2018. Below-normal rainfall levels from the start of the year were followed by surplus precipitation in the final three months of the year, which helped to keep spot prices down during that quarter.

However, this decrease was mitigated by a significant year-on-year rise in spot prices in January, caused by temperatures that were almost 4^° C lower than in 2018 and thus induced higher consumption (+5.4TWh). The average price for January was thus €61.2/MWh, €26.2/MWh higher than the previous year. The same effect, although on a more moderate scale, was observed in April and May when prices increased (+€4.5/MWh and +€2.8/MWh respectively, baseload) due to lower temperatures than in 2018, and consumption was 3TWh higher in total over the period. Lower hydropower generation also contributed to a rise in spot prices in those months.

In 2019, demand in France stood at 469.7TWh, down by 6.5TWh from 2018. More use was made of gas-fired plants (+7.9TWh) as nuclear plant availability (and therefore generation) and hydropower output both declined (by -13.7TWh and -5.7TWh respectively compared to 2018). Wind and solar power generation, meanwhile, increased by 5.9TWh and 1.7TWh to reach the respective levels of 32.7TWh and 11.4TWh in 2019.

France’s export balance was 4.4TWh ⁽²⁾ lower in 2019 than 2018. It decreased significantly in January (-6.0TWh) due to lower year-on-year temperatures and hydro conditions. Although milder temperatures in February and March then led to a 6TWh rise in net exports compared to 2018, exports were down throughout the rest of the year. This is explained by lower interconnection availability with the United Kingdom and Spain in the spring, high wind power generation in Germany in 2019, and less nuclear plant availability at the end of the year.

In the United Kingdom, average spot electricity prices were €15.9/MWh lower than in 2018, standing at €49.0/MWh for 2019. The downturn was first observed in February, in sharp contrast with the record levels of February and March 2018. This was accentuated when the 1GW NEMO UK-Belgium interconnection service came on line. Subsequently, declining gas prices pulled spot electricity prices downwards from April, when average monthly prices began a general decline taking them 32% below 2018 levels (-€21/MWh on average).

In Italy, average spot prices were down by €9.0/MWh from 2018, to an average €52.3/MWh for 2019. The decrease principally concerned the months of August to December, when prices were 30% below 2018 levels in the wake of declining gas prices. Early in the year, January prices were 38% higher year-on-year, due to the colder temperatures of 2019.

In Germany, spot prices for electricity decreased by €6.8/MWh from 2018 to an average €37.7/MWh in 2019. However, prices registered a rise at the start of the year. This rise was very pronounced in January, when prices were €19.9/MWh higher than in 2018 due to lower temperatures. Apart from March, when prices were down by €6.7/MWh because of very windy conditions (average +7.2GW of wind power compared to 2018), prices moved in line with CO₂ and coal prices during the rest of the year. Until July, the sharp rise in CO₂ quota prices drove prices upwards as coal prices saw a smaller decrease. From August onwards, there was a substantial downturn in prices echoing movements in coal prices, which became the dominant factor over the CO₂ price increase. Since then, monthly spot electricity prices have fallen by almost €17.3/MWh compared to the same period of 2018. Wind power output was up by 15.2TWh from 2018, reaching 123.8TWh in 2019, while photovoltaic power output was up by 0.7TWh to 41.9TWh in 2019. At 31 December 2019, Germany’s total installed wind power and photovoltaic power capacities were around 61GW and 49GW respectively. Several periods of significant wind and photovoltaic power generation led to negative prices (211 hours in 2019 against 134 hours in 2018). The lowest hourly price was -€90.0/MWh, registered on 8 June.

In Belgium, spot prices retreated by €15.9/MWh from 2018, with an average priceof €39.3/MWh for 2019. The decrease principally concerned the months of June to December, when prices were around 45% lower than in 2018, in line with lowerfuel prices and better nuclear plant availability than the previous year, althoughJanuary prices were nearly 65% higher due to colder temperatures.

(1) France and Germany: average previous day EPEXSPOT price for same-day delivery; Belgium: average previous day Belpex price for same-day delivery; United Kingdom: average previous day EDF Trading OTC price for same-day delivery; Italy: average previous day GME price for same-day delivery.
(2) Source: ENTSO-E Transparency Website.