Swedish Power Price Poised to Gain as Nuclear Outages Double
The amount of time Sweden’s reactors will shut for overhauls this year will almost double, buoying power prices at a time they typically decline as water volumes for generation drop to near a two-year low.
EON SE (EOAN), Vattenfall AB and Fortum Oyj (FUM1V) will halt the nation’s 10 atomic units for a total of 650 days of maintenance, up from a planned 352 last year, according to filings by the operators to the Nord Pool Spot AS exchange in Oslo. Output from hydro plants, the other main source of power in the Nordic region’s biggest economy, may be 30 percent lower than last year through July, according to Bixia AB, a Swedish power-trading company.
Longer reactor outages may force Sweden to ship in power after record exports last year, potentially boosting costs for energy intensive users including Volvo AB. Unusually low snow levels mean hydropower production will be lower than average, preventing prices from falling as they normally do during the spring and early summer thaw, according to Christian Holtz, an analyst at Swedish power-trading company Telge Kraft AB.
“Nordic power prices can collapse for long periods, for example in July, something which is unlikely to take place this year because of the simultaneous water deficit and nuclear outages,” Holtz said by telephone from Soedertaelje, Sweden. “As a result of the outages power in Stockholm and Malmoe will cost more than the Nordic average in May and June, with prices rising to levels on par with Germany.”
Nordic power for May traded at 36.40 euros ($47.59) a megawatt-hour at 10:38 a.m. while the June contract was at 36.70 euros yesterday on Nasdaq OMX Group Inc.’s energy exchange in Oslo. Peakload contracts for May and June in Germany, the region’s biggest electricity market, cost 38 euros and 42.50 euros today, respectively, according to broker data compiled by Bloomberg.
Hourly prices in Sweden, Finland, eastern Denmark, and the middle and north of Norway rose to as much as 1,400 euros a megawatt-hour on Dec. 17, 2009, and Feb. 22, 2010, because of low nuclear generation capacity and colder-than usual weather, while prices in southern Norway and western Denmark were about 65 euros, according to a January 2011 report by NordReg, a group of Nordic energy market regulators.
“As we’ve seen in the past, nuclear outages can contribute to very dramatic price surges,” Holtz said.
The Nordic region has 14 reactors that generate one fifth of the area’s power and meet half of Sweden’s needs. More than half of the Nordic area’s electricity comes from hydroelectric plants. High hydropower production last year contributed to a dip in prices last year, according to Bixia.
“We will not get low Nordic spot prices this summer, due to a lack of water and snow,” Anders Engkvist, chief analyst at Swedish power traders Bixia, said yesterday by phone from Linkoeping, Sweden. “Any price dip would require extremely wet weather, which doesn’t look likely.”
The Nordic area has 21.7 terawatt-hours less water and snow available for production than on average, according to data from Markedskraft AS, Nordic power market analysts based in Arendal, Norway. That compares with Denmark’s annual electricity use of 35 terawatt-hours.
“The snowpack in Norway has a deficit of 11 terawatt- hours, in addition to a 2 terawatt-hour shortage in Sweden, which will become visible in May through July when the melting period starts at higher altitudes,” Tor Reier Lilleholt, head of Nordic analysis at Markedskraft, said in an interview in Oslo on April 18.
The nuclear outages may also affect prices throughout the Nordic region in the winter, when demand peaks, Holtz said.
The reactor outages have an uncertainty margin of 36 to 102 days, the Nord Pool data show. The first planned halt started on April 28, as Vattenfall took the 878-megawatt Ringhals-1 reactor offline for 35-day yearly maintenance and refueling work. EON will stop its 638-megawatt Oskarshamn-2 from June this year to April 21, 2014.
Nuclear output is especially important for prices in winter as costs hinge on how much power is produced at any given moment and electricity cannot be stored.
“Prices could really spike during some peakload hours in the first quarter next year, which is always a risky period for the Nordic power market,” Holtz said. “I wouldn’t be surprised if the outages last longer than announced.”
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