Operating environment Q1 2023
European power markets
During the winter, the European market experienced historically high prices and huge uncertainty, however, it was well prepared to manoeuvre in the volatile environment. After a turbulent year 2022 in the energy sector, gas storages were full and energy demand was significantly reduced. Despite the cold start in December, the winter turned out mild and windy, significantly lowering gas, coal and power prices. In the Nordics, the start-up of Olkiluoto 3 – after many delays – and the rapidly expanding wind power capacity created additional trust for a normalising price environment. In light of the gas market fundamentals, the European energy crisis may not be over yet, but getting through the winter was definitely an important milestone on the path towards securing energy supply in Europe.
According to preliminary statistics, power consumption in the Nordic countries was 110 (112) TWh during the first quarter of 2023. Power demand was clearly below the five-year average, due to mild temperatures and the active price-induced demand reduction across various demand segments.
In Central Western Europe (Germany, France, Austria, Switzerland, Belgium and the Netherlands), power consumption in the first quarter of 2023 was 345 (369) TWh, according to preliminary statistics. Power demand in Continental Europe was below the five-year average, also affected by mild temperatures and energy conservation.
At the beginning of the first quarter, the Nordic hydro reservoirs were at 79 TWh, which is 5 TWh below the long-term average and 6 TWh higher than in the previous year. Both hydro inflow and hydro generation were slightly below the normal level. At the end of the quarter, the reservoir levels were at 38 TWh, which is 3 TWh below the long-term average and 3 TWh higher than in the previous year.
In the first quarter, power prices retreated from the high levels in the previous quarters. The average system spot price in Nord Pool was EUR 85.2 (110.0) per MWh. The average area price in Finland was EUR 77.6 (91.8) per MWh and EUR 76.1 (99.9) per MWh in the SE3 area in Sweden (Stockholm). In the SE2 area in Sweden (Sundsvall), the average area price was EUR 53.4 (24.8) per MWh. In Germany, the average spot price in the first quarter was EUR 115.8 (184.6) per MWh.
Early May, the Nordic system electricity forward price on Nasdaq Commodities for the remainder of 2023 was around EUR 60 per MWh and for 2024 around EUR 70 per MWh. The Nordic water reservoirs were at 32 TWh, which is about 5 TWh below the long-term average and 3 TWh higher than one year earlier. The German electricity forward price for the remainder of 2023 was around EUR 116 per MWh and for 2024 around EUR 148 per MWh.
European commodity markets
In the first quarter, gas demand in Central Western Europe was 621 (705) TWh. The Central Western European gas storage levels decreased from 532 TWh at the beginning of the quarter to 346 TWh at the end of the quarter, which is 207 TWh higher than one year ago and 153 TWh higher than the five-year average (2018–2022).
The average gas front-month price (TTF) in the first quarter was EUR 53 (101) per MWh. The 2024 forward price decreased from EUR 78 per MWh at the beginning of the quarter to EUR 57 per MWh at the end of the quarter, which is EUR 10 per MWh higher than one year earlier.
In the EUA (EU Allowance) markets, the price increased from EUR 86 per tonne at the beginning of the first quarter to EUR 92 per tonne at the end of the quarter, which is EUR 15 per tonne higher than one year earlier.
The forward quotation for coal (ICE Rotterdam) for 2024 decreased from USD 173 per tonne at the beginning of the quarter to USD 143 per tonne at the end of the quarter, which is USD 16 per tonne above the price one year earlier.
Early May, the TTF forward price for gas for the remainder of 2023 was EUR 44 per MWh. The forward quotation for EUAs for 2023 was at the level of EUR 86 per tonne. The forward price for coal (ICE Rotterdam) for the remainder of 2023 was USD 123 per tonne.