Nordic Power Rebound Seen Ending Amid Above-Average Water Stores

A rebound in Nordic electricity prices may end this month as hydro reservoir-levels are above average and costs are approaching levels where the region will attract supplies from Germany.

Nordic next-quarter prices gained 13 percent in the past month after reaching its lowest level since May 2007. The benchmark probably won’t exceed 29 euros ($38) a megawatt-hour, or about 12 percent more than today’s price, Shepherd Energy AB, a money manager in Stockholm, said in a report. That’s the level where it becomes profitable for coal-fired generators in Germany, Europe’s biggest market, to export power to its northern neighbors.

As Europe’s electricity grids are connected, Nordic prices are mainly set by costs in neighboring economies as well as availability of water to run through turbines and output from nuclear reactors. Hydro levels were 33.2 percent full last week, compared with 24 percent a year ago, according to data on the Nord Pool Spot AS website.

“If the forecast becomes wetter, then prices for the third quarter will go down, as the situation for the Nordic supply side is looking very good at the moment,” Ulrik Ljungars, a Nordic power trader at Modity Energy Trading AB in Lund, Sweden, said May 6 by phone.

The next-quarter contract fell 0.6 percent to 25.75 euros today on the Nasdaq OMX Commodities exchange in Oslo. Prices may fall below the 22.75 euros it reached April 10 if forecasts show wetter weather, Ljungars said.

2013 Deficit

The amount of water available to generate electricity was

3.6 terawatt hours above normal for this time of year yesterday, up from a 21.3 terawatt-hour deficit a year ago, Markedskraft data on Bloomberg show.

Hydro power accounts for 53 percent of output and atomic energy contributes 23 percent, according to Entso-e, a lobby group for European grid operators.

Sweden, the region’s biggest economy, was a net exporter of 2,684 gigawatt-hours of power in 2012 and imported 73 gigawatt-hours last year, according to Svenska Kraftnaet AB, the nation’s grid operator.

Aggregated nuclear output in the Nordic region will rise above 70 percent of available capacity by July from about 51 percent on May 25, according to Nord Pool data on planned plant outages. Output at the 14 reactors supplying the region was at 63 percent of capacity today, data from operators compiled by Bloomberg show.

“Precipitation totals are forecast to be above normal across many southern and eastern parts of Scandinavia over the next seven days,” MetraWeather, a unit of New Zealand’s MetService, said today in an e-mailed report. Many northern parts are likely to see rainfall totals near to or below normal for this time of year, it said.

Day-Ahead Prices

Increasing hydro reserves and nuclear availability will probably damp the day-ahead price in July, a period of relatively low consumption in the region, Arne Oesterlind, a shepherd portfolio manager, said May 6 by phone from Stockholm.

Next-day Nordic power settled at 30.83 euros in an auction on Nord Pool today, the highest level since April 1. It averaged

33.22 euros in the past 12 months.

“If there is a hydrological surplus at the start of July we might very well see day-ahead prices down toward 10 euros,” Oesterlind said.

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