European Power Prices Surge as Germany Decides to Shut Reactors
European power prices rose, surging to their highest in more than two years in Germany, where the government decided to halt the country’s seven oldest nuclear reactors following explosions at an atomic plant in Japan.
Baseload electricity for next quarter in Germany, Europe’s biggest power market, rose to the highest price since November 2008. The contract increased as much as 8.75 euros, or 16 percent, to 62.75 euros ($87.23) and was at 62.70 euros as of 1:20 p.m. Berlin time, according to broker data compiled by Bloomberg. Baseload is generated and sold around the clock.
“There was a massive reaction to the decision to halt the nuclear plants and that caused an intraday rally,” Kevin McDermott, a Tullett Prebon director for European energy and commodities, said today by phone from London. Volumes are set to beat yesterday’s levels, the highest this year, he said.
Germany, Europe’s biggest power market, will keep its seven oldest nuclear reactors off line during a three-month moratorium it will use to evaluate the safety of the facilities, Chancellor Angela Merkel told reporters in Berlin today. The plants were all built before 1980. E.ON AG (EOAN) is already preparing to take its 878-megawatt Isar-1 reactor built in 1977 off line, and will close it in the coming days, according to a company statement.
Baseload electricity for next year in Germany rose to the highest price since May. The regional benchmark climbed as much as 2.50 euros, or 4.5 percent, to 58.45 euros a megawatt-hour. Prices in the neighboring Czech Republic also surged following the German government’s decision. Month-ahead Czech baseload power gained 10.05 euros, or 19 percent, to 62.95 euros a megwatt-hour.
“The market has another 2 euros to go for the next-year contract to price in the decision to halt these old reactors,” said Konstantin Lenz, portfolio management director at Kom- Solution GmbH, an adviser to local Stadtwerke utilities. Some capacity will be replaced by French nuclear imports, he said.
Japan’s worst earthquake, which hit the nation on March 11, led to three explosions at the Fukushima Dai-Ichi nuclear plant. Workers are struggling to prevent a meltdown, triggering a review of nuclear safety at plants across the world.
The halt will cut German nuclear capacity by 4,900 megawatts, according to an estimate by Societe Generale analyst Emmanuel Fages in Paris. Some 2,100 megawatts of nuclear capacity is already off line, he said by e-mail.
U.K. natural gas for delivery in the six months from April rose to its highest since October 2008 as demand for the fuel increased in Japan to compensate for lost nuclear output after reactors shut following the country’s worst earthquake.
Natural gas in the U.K., Europe’s biggest market, gained as much as 1.7 percent, to 65.25 pence, its highest price since October 2008, according to broker data compiled by Bloomberg. Bloomberg tracks prices from brokers including ICAP Plc, GFI Group Inc., Spectron Group Ltd., Tullett Prebon Plc and Tradition Financial Services.
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