Dec. 11 (Bloomberg) -- The power price in the Nordic region for next year fell to a record low as warm winter weather is forecast to cut heating demand and top up hydroelectric reservoirs with melting snow.
Power for delivery in the region from January through March, the benchmark contract, fell 1.9 percent to close at 36.20 euros ($49.92) a megawatt-hour today, the lowest level since it started trading in January 2012, according to data from Nasdaq OMX Group's commodity unit in Oslo. Contracts for January and the whole of 2014 have also reached record lows.
The forecast for Nordic hydropower reserves two weeks ahead has been above the seasonal average for five days, the longest surplus in more than a year, Markedskraft data on Bloomberg show. Average temperatures across the region next week are forecast at 3.6 Celsius (38.5 Fahrenheit), compared with the seasonal norm of 0.2C, MetraWeather data show.
Hydropower producers “have to compete with each other since there is not enough consumption and export for everyone,” Tor Reier Lilleholt, head of Nordic analysis at Arendal, Norway-based Markedskraft ASA, which advises power producers and consumers, said by phone today. “If current weather patterns persist it can go as low as 32 euros a megawatt-hour,” he said, referring to the first-quarter contract.
Norwegian hydroelectric reservoirs were 70.5 percent full last week, compared with the seasonal average of 76.9 percent, according to data on the website of Nord Pool Spot AS exchange in Oslo. Swedish hydroelectric reservoirs were 67.4 percent full, compared with a seasonal average of 74.1 percent.
Norway and Sweden got 94 percent and 45 percent of their power from hydroelectric plants respectively in 2011, according to Eurostat data compiled by Bloomberg.
Temperatures across Norway, Sweden, Denmark and Finland averaged 6 Celsius since the start of October, 0.9 degrees higher than the seasonal norm, according to MetraWeather data. One degree of temperature above the seasonal average cuts demand in the region by 750 megawatts, Lilleholt said. That’s the equivalent of 1.5 percent of the region’s 8.4 terawatt-hours hours of power consumption last week, according to data from Bloomberg Industries.
“Power demand throughout the Nordic region fell during 2013 due to lower heating demand and lower industrial output,” with the biggest decrease of 15 percent from a year earlier coming in the week ending Dec. 6, Chris Rogers, analyst for power generation in Europe at Bloomberg Industries in London said in a research note published Dec. 9.
“At the same time, normal wind power output in the Nordic countries is at about 4,000 megawatts, thanks to some 1,600 megawatts of capacity installed during last year,” Markedskraft’s Lilleholt said.
The continuation of current weather might put pressure on power contracts for summer delivery “as we see melting of more snow than normal from April to August,” Lilleholt said.
“A surplus of potential low-cost power production in reservoirs and snow pack,” may depress the price at which utilities Fortum Oyj and Statkraft AS can sell their power in the first quarter, Rogers said.
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