The month of May, 2023, was characterised in the European markets by a continuation of the downward trend in electricity demand while wind energy production and photovoltaic energy production continue to grow. This situation, together with a downward trend in gas and CO2 emission rights prices, drove prices down in virtually all electricity markets.
Solar photovoltaic and thermoelectric energy production and wind energy production
In May, 2023, solar energy production increased in most of the markets analysed at AleaSoft Energy Forecasting compared to the same month in the previous year. The largest rise, of 32%, was registered in the Portuguese market, followed by increases of 9.6% and 6.5% in the Spanish and German markets, respectively. The French market showed the smallest increase of 4.1%. On the other hand, solar energy production in the Italian market decreased by 5.9% year-on-year.
Compared to April, solar energy production in May increased only in the German and French markets, by 41% and 11%, respectively. For the rest of the analysed markets, the trend was the opposite, with decreases in the Iberian Peninsula and Italy, with the highest drop, of 5.8%, in Italy. In the Spanish market, solar energy production, which includes solar photovoltaic and solar thermoelectric energy production, fell by 3.1%, and in the Portuguese market the drop was 2.8%.
In the Iberian market, solar photovoltaic energy production in May reached the highest monthly value in Spain for this month, of 3822 GWh and 365 GWh in Portugal. Additionally, in the German and French markets, the monthly solar photovoltaic energy production was the highest registered for a month of May with values of 7837 GWh and 2385 GWh, respectively.
In the month of May 2023 in the analysed markets, daily records of solar photovoltaic energy production were registered. During the first fortnight of the month, the record was broken in Spain on May 5 with 147 GWh of generation, in Italy on May 6 with 115 GWh generated and in Portugal on May 13 with 15 GWh. In the second half of the month, the record was broken in France on May 26 with 110 GWh generated and in Germany on May 27 with 353 GWh.
On the other hand, according to REE data, in May 2023, the increase in Spanish solar photovoltaic energy capacity compared to the capacity installed at the end of April was 545 MW. According to REN data, in May 2023, the increase in Portuguese solar energy capacity compared to the capacity installed at the end of April was 11 MW.
Source: Prepared by AleaSoft Energy Forecasting using data from ENTSO-E, RTE, REN, REE and TERNA.
Source: Prepared by AleaSoft Energy Forecasting using data from ENTSO-E, RTE, REN, REE and TERNA.
In the case of wind energy production in May 2023, a year-on-year increase was registered in all markets analysed at AleaSoft Energy Forecasting. The largest increases were registered in France of, 67%, Portugal, of 42% and Italy, of 35%. On the other hand, the smallest increases were registered in the German and Spanish markets with increases of 5.2% and 16%, respectively.
Compared to April, wind energy production in May rose in the Iberian Peninsula, by around 29% in the Portuguese market and by 7.2% in the Spanish market. The rest of the analysed markets registered a drop in wind energy production. The smallest decrease of 4.0% was in the French market, followed by decreases of 24% in the German market and 32% in the Italian market.
In addition, in the Spanish market, the monthly wind energy production of 5310GWh was the highest ever registered for a month of May.
Source: Prepared by AleaSoft Energy Forecasting using data from ENTSO-E, RTE, REN, REE and TERNA.
Electricity demand
During May 2023, year-on-year decreases in electricity demand were registered in all the analysed European markets. The largest drop, of 15%, was in the Dutch market, followed by the Belgian market, with a 7.5% drop. In the remaining analysed markets, year-on-year decreases in electricity demand were between 1.0% in the Portuguese market and 6.7% in the Spanish market.
Compared to the previous month, electricity demand also decreased in most of the analysed markets. The largest drop of 14% was registered in France. The rest of the drops in electricity demand were between 3.2% of the German market and 10% of the market of Great Britain. Only the Italian, Spanish and Portuguese markets registered slight increases in demand with growth of 0.8%, 1.5% and 1.6% respectively.
The drops in electricity demand in May compared to the previous month were mainly influenced by the generalised increase in average temperatures. With the exception of the Iberian Peninsula and the United Kingdom, average temperatures rose by more than 4.0°C, causing the most substantial drops in demand.
On the other hand, for a month of May, the electricity demand in France was the lowest in three decades at 30 337 GWh and in the Netherlands at least since 2015, with a value of 6240 GWh.
Source: Prepared by AleaSoft Energy Forecasting using data from ENTSO-E, RTE, REN, REE, TERNA, National Grid and ELIA.
European electricity markets
In the month of May 2023, the monthly average price was below €100/MWh in almost all European electricity markets analysed at AleaSoft Energy Forecasting. The exception was the average price of the IPEX market of Italy, of €105.73/MWh. On the other hand, the lowest monthly price, of €37.59/MWh, was registered in the Nordic Nord Pool market. Elsewhere, averages were between €74.21/MWh of the MIBEL market of Spain and €81.72/MWh of the EPEX SPOT market of Germany.
Compared to April, average prices fell in May in almost all European electricity markets analysed at AleaSoft Energy Forecasting. The exception was that of the Spanish market, which remained stable, with a modest increase of 0.6%. There was also little change in the Portuguese market, where the price fell by 1.1%. On the other hand, the largest drop, of 52%, was registered in the Nordic market. The rest of the markets registered price decreases between 19% of the German market and 27% of the French market.
Comparing the average prices of May with those registered in the same month of 2022, prices fell in all analysed markets. The largest drop was also in the Nordic market, of 67% in this case. In the remaining markets, price drops were between 35% of the N2EX market of the United Kingdom and 61% of the French market.
As a result of the price declines registered, the May average was the lowest since 2021 in all markets analysed, except for the Iberian market. In the case of the Nordic market, the lowest monthly price since March 2021 was reached. In the UK market, the May price was the lowest since April 2021, while in the Netherlands it was the lowest since June 2021. In Germany and Italy, the lowest averages since July 2021 were registered. Finally, the May price was the lowest since August 2021 in France and Belgium.
In May 2023, the year-on-year price decrease in European electricity markets was driven by the fall in the average gas price and the general decline in demand. In addition, wind energy production increased in all the analysed markets and solar energy production in most of them. On the other hand, the drop in the average gas price compared to the previous month and the fall in demand in most markets also contributed to the price decreases compared to April. However, in most of the analysed markets, decreases in wind or solar energy production were registered, limiting price falls.
Source: Prepared by AleaSoft Energy Forecasting using data from OMIE, EPEX SPOT, Nord Pool and GME.
Brent, fuels and CO2
Brent oil futures for the Front?Month in the ICE market registered a monthly average price of $75.69/bbl in the month of May. This was 9.2% lower than the Front-Month futures price in April, of $83.37/bbl. It was also 32% lower than the corresponding May 2022 Front-Month futures price, of $111.96/bbl. In fact, the May 2023 average price was the lowest since December 2021.
During the month of May, Brent oil futures prices evolved under the influence of several factors. On the one hand, fears of an economic recession, instability in the banking sector, as well as concerns about the possibility of further interest rate hikes in the United States, exerted a downward influence on prices. On the other hand, April employment data for the United States and statements about the US government’s intention to replenish its strategic oil reserves led to price increases in May. In the second half of the month, US debt ceiling negotiations and statements about the upcoming OPEC+ meeting of June 4 also influenced futures prices.
As for TTF gas futures in the ICE market for the Front-Month, the average value registered during the month of May was €31.73/MWh. Compared to that of the Front-Month futures traded in April, of €42.21/MWh, the average decreased by 25%. Compared to the Front-Month futures traded in May 2022, when the average price was €94.09/MWh, there was a decrease of 66%. On the other hand, the monthly average for May 2023 was the lowest since June 2021.
The month of May 2023 started with high stocks for the time of year in Europe. During this month, TTF gas futures prices were also influenced downwards by the abundant supply of liquefied natural gas and declining demand. In the fourth week of May, the release of data on German economic developments also contributed to this trend, increasing fears of a further decline in demand.
Regarding CO2 emission rights futures in the EEX market for the reference contract of December 2023, they reached an average price in May of €86.05/t, 6.9% lower than the previous month’s average of €92.47/t. Compared to the May 2022 average for the reference contract of December of that year, of €85.78/t, the May 2023 average was only 0.3% higher.
Source: Prepared by AleaSoft Energy Forecasting using data from ICE and EEX.
AleaSoft Energy Forecasting’s analysis on the prospects for energy markets in Europe
The next webinar of the series of monthly webinars of AleaSoft Energy Forecasting and AleaGreen will be held on Thursday, June 8. This edition will have the participation of speakers from Engie, contributing with their extensive experience to the analysis of the financing of renewable energy projects and PPA. In addition, the webinar will analyse the evolution of the European energy markets as well as the main regulatory issues in the Spanish electricity sector.
