Last year Europe saw very high levels of wholesale power prices, driven by gas prices that repeatedly broke all-time high records since the start of the Ukraine war.
This was the standout highlight from the latest report on the European energy market from data analyst EnAppSys. The report also points to issues within France’s nuclear fleet and droughts reducing hydropower output as key factors impacting power prices in 2022.
Title Transfer Facility (TTF) prices in the Netherlands – a virtual trading point for natural gas in this country – reached an unprecedented high of €308.18/MWh in August due to the impact of the war in Ukraine, widespread reductions in availability of the French nuclear fleet, and droughts which reduced hydropower output across multiple regions including Norway.
The issues with the French nuclear fleet resulted in France becoming a primary importer of power during various periods of 2022. This reversed usual trends as this country has historically been one of the largest exporters of power in Europe.
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Wholesale prices started dropping towards the end of the year once large volumes of gas were stored in preparation for winter. A warm autumn contributed to the drop in prices and for a short period there was an oversupply of gas, with liquid nitrogen gas (LNG) tankers waiting offshore to be offloaded, while storage was filled to its limits.
Sweden became the largest exporter in Europe, exporting 33TWh across the year. Denmark and Finland received the largest share of these exports.
Jean-Paul Harreman, director of EnAppSys BV, said: “Last year, the headlines surrounding the Ukraine war had the greatest impact on European gas prices…
“However, there were other factors that further contributed to the rise in prices. In Q2 2022 there was a scarcity of power due to a decline in French nuclear generation and a drought in Norway. France saw nuclear generation dip as low as 20GW at times due to stress corrosion cracking in the aging reactors, which substantially reduced availability. Meanwhile, drought across Europe reduced hydropower generation and caused a steep rise in wholesale electricity prices in Q2 2022. This impacted France and the Iberian Peninsula, as well as the Balkans. Norway was also heavily impacted; this resulted in an average price of €168/MWh for several Norwegian regions. The hydro fleet comprises most of the Norwegian generation mix, so prices are highly sensitive to variations in hydro generation.
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“The droughts even caused Norway, historically one of the biggest exporters of power, to at times reverse the flow of its interconnectors from a net export to a net import position for multiple periods during the year.
“Due to high gas prices, coal and lignite generation was higher than in previous years as high gas prices pushed gas units out of merit in many markets. Poland, normally a net importer of power, was able to export for extended periods as its coal and lignite power plants had a lower marginal cost than the gas assets in surrounding countries.”
Record electricity prices in GB market in 2022
In the British market, the report points to similar causes of record high electricity prices, namely the Russia-Ukraine war, problems with the French nuclear fleet, low hydro output and distortions in the Nord Stream 1 pipeline flow.
Average day-ahead electricity prices were 70% higher in 2022 compared with the previous year and more than four times greater than levels seen in years prior to that. Prices were high in both peak and off-peak settlement periods.
Problems with the French nuclear fleet resulted in GB exporting significantly more power to the continent across the interconnectors, even during the summer months when traditionally export levels from GB to France drop. This created a golden period for CCGTs, with spark spreads increasing dramatically. It also contributed to GB becoming a net exporter of electricity over the course of Q2, Q3 and Q4 in 2022.
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Gas-fired CCGT generation was the largest contributor to the GB system generation mix with a total output of 111.7TWh. This equates to 40.4% of the generation mix for gas and 43.4% for renewables, though the latter figure drops to 34.6% , if the dispatchable biomass fleet is not considered. The overall proportion was split between 40.4% for gas, 28.1% for wind, 16.3% for nuclear and 8.8% for biomass. The rest of the mix was made up of -1.5% for imports, 4.5% for solar and 1.6% for coal.
Renewable output totalled 119.5TWh in 2022, the highest on record over the last decade, due primarily to high wind levels. Wind output was the highest generation source after gas, totalling 77.6TWh. This was a 15.2TWh increase on 2021 levels – the largest uplift in wind generation in GB over the last decade.
The year ended with National Grid putting in place winter contingency contracts with three coal-fired generators and introducing a demand flexibility service scheme to bolster security of supply for the winter.
