German power for delivery next year, a European benchmark, fell to the lowest since May 2005 and coal dropped to a record after analysts at Credit Suisse Group AG cut their price expectations for the commodities.
German electricity for next year on the European Energy Exchange AG in Leipzig, dropped as much as 1.5% to 37.93 euros ($50.17) a megawatt-hour before closing at 37.99 euros. European thermal coal for next year slid as much as 1 percent to a record $88 a metric ton.
The price slump underlines how German Chancellor Angela Merkel’s plans to increase solar and wind output are hurting prices in Europe’s 430 billion-euro power market. The renewable energy boom has created a power surplus at a time when consumption in Europe’s biggest energy market is at the lowest since 2003, according to AG Energiebilanzen e.V., an association of energy lobbies and research institutes.
“There is no evidence of a recovery of demand trends in the foreseeable future,” Vincent Gilles, a London-based analyst at Credit Suisse, said in an e-mailed report today. “While our model previously showed a gradual power price recovery post 2017, we now don’t see this happening before 2020.”
German power for delivery in July declined as much as 2.5 percent to 30.80 euros a megawatt-hour as solar generation is expected to increase over the summer. The contract traded at 30.90 euros at 5:50 p.m. in Berlin, according to broker data compiled by Bloomberg.
RWE AG, Germany’s second-biggest utility, cut output at the two blocks of its Gundremmingen nuclear plant on June 8-9 because of high solar generation and low demand, Lothar Lambertz, a spokesman for the company, said via phone today.
“More solar is kicking in and that means weaker prices,” said Min-Soo Park, a power trader at MVV Trading GmbH in Mannheim. On the EPEX Spot power exchange, the price for power between 6 a.m. and 7 a.m. yesterday dropped to 1.94 euros a megawatt-hour compared to a 12-month average of 35.89 euros, exchange data on Bloomberg showed.
In France, next-year power for baseload delivery fell as much as 0.8 percent to 41.60 euros a megawatt-hour, the lowest since May 13, broker data showed.
“We cut our central European power prices to below 40 euros a megawatt-hour,” Gilles said in his report. Gas-fired plants will continue to lose “vast amounts” of money while profits for coal plants will shrink through 2020 and lignite plants remain the most profitable, he said.