Highlights from our Market Expert View Spring Edition

Gas slave to geopolitics 

Over the past month, European gas prices have collapsed as speculators pulled out and geopolitical developments sparked hopes for the return of Russian supply. Talks of softening gas storage targets - currently distorting the forward market and pushing up summer prices - have also contributed to the price drop. The Dutch TTF saw a year-long bullish trend end as prices dropped from nearly €60 in mid-February to the low €40s. Looking ahead, much hinges on progress – or lack thereof - in peace talks. With winter behind us, the market will closely watch storage development to see whether injections can pick up despite the absence of proper incentives from the summer/winter spreads. 

A calm CO₂ market; moving with gas while other fundamentals pose limited surprises 

The accelerated growth of renewable electricity envisioned a few years ago has definitely materialised, and does not seem to be a CO2 price uncertainty of significance this year. On the demand side, weak economic sentiment indicators, combined with weak progress in electric vehicles and green hydrogen, present downside risks. The impacts of a trade war can exacerbate the already weak prospects.  

Steel and chemicals continue to struggle with overcapacity and high costs. The long-awaited Clean Industrial Deal, as well as the Carbon Border Adjustment Mechanism, are measures that may eventually protect manufacturing industries, but not in the immediate term.  

In the coming weeks, the CO2 market can have major attention to the data disclosure of CO2 emissions for 2024, as this may set the stage for the market’s medium-term demand perceptions. 

Europe's hydrological contrasts: abundance in Iberia, scarcity in the Alps, and a dry summer ahead 

Hydrological conditions across Europe show contrasting scenarios. The Alps are experiencing a hydrological shortfall, with snow levels below normal, impacting reservoir levels and hydro production. In contrast, Iberia has abundant hydro resources, with hydro reservoir levels and production well above normal due to recent storms and frequent rainfall. Seasonal forecasts indicate a mix of dry and warm conditions across Europe this summer, particularly in southern regions. These conditions may lead to lower hydro reservoir levels and reduced hydro production, affecting water resource management and energy prices. 

European industry and the German power market 

European industry continues to grapple with high energy costs in comparison to competing markets like the U.S. or China. The European Commission aims to address this topic and plans actions to make electricity bills more affordable and focus on energy efficiency and savings. Flexibility in production can be one of the success factors, yet industries still face numerous barriers. Offering demand response requires investments in flexibility assets and can disrupt production processes. Building up competencies in understanding power markets and a change in the behaviour of demand response provision play an important role as well.  

In Germany, strong solar PV generation is driving spot price volatility. Installed capacity has already reached 100 GW and the projected growth continues strongly. This also lowers power demand during the middle of the day. Other supply like wind generation has underperformed and is compensated by stronger gas and coal generation and imports. Our price forecast shows lower prices compared to the beginning of the year due to lower gas prices and strong SPV generation putting pressure on spot prices in the summer.  

CEE and SEE: looking ahead to summer 2025  

Looking ahead to summer 2025 in the SEE and CEE power markets, we reflect on the volatility of summer 2024. Hungary took centre stage last year, reaching record prices driven by a "perfect storm" of grid constraints, tight regional supply, and structural bottlenecks. 

Several factors are worth monitoring for the summer of 2025: 

• Critical Network Elements in Contingency (CNECs) and the corresponding shadow prices help explain underlying stress points in the grid, many of which are already reappearing in Q1 2025. 

• Urgent Market Messages (UMMs), especially planned outages for nuclear production, are fundamental. In Bulgaria, Kozloduy 5 (1.040 MW) will go offline for 40 days from May 4, while in Hungary, Paks 4 (500 MW) will be offline in June, followed by Paks 2 from mid-July to end-August. 

• Consumption is on the rise: Hungary is scaling up battery manufacturing, and Romania already reached a two-year consumption record in February. 

• The East saw a major boost in solar capacity: in 2024 Romania added 1,7 GW, Poland added 4 GW, reshaping both, commercial flows and prices. 

• Exports to Ukraine reached 86 GWh in week 9 of 2025, with 37% supplied by Hungary. There are tentative discussions about a ceasefire on energy infrastructure, but recent developments suggest this remains highly uncertain. 

France and the FR-DE cross-border spread: summer 2025 outlook 

As of 30 January, we increased our French nuclear output forecast based on EDF’s new annual targets. We now project total nuclear generation of roughly 367 TWh in 2025, factoring in the modulation operated by roughly 20 GW of units which reduce their output in a price-sensitive manner, depending on RES generation. 

For Iberia, our short- and mid-term outlook suggest the risk of a high number of “zero hours” in delivery. This will impact ES>FR border flows, especially in Q2, which we currently expect to be slightly colder and wetter than normal. 

For Q3, deeper analysis with our fundamental model is needed to provide a clear signal regarding prices and exchanges. Our current model output, based on normalised consumption and RES data, points to a bearish signal of €10/MWh. We will investigate further by testing higher consumption scenarios and different weather years to cross-check the impact of (probable) heat waves and below-normal wind profiles on the forecast. 

Finally, to address the many questions form market players regarding potential XB reductions on the FR-DE border, we performed an analysis of the CNECs in CORE, zooming in on the shadow prices and IVA applied by each TSO. During Q1 2025, we observed the application of 200-400 MW of IVA on some of the neuralgic lines between France and Germany. However, we are currently not in a position to determine whether larger restrictions will be implemented in the coming weeks or months. Should that be the case, we will prepare an ad-hoc analysis with our SPOTEX model, testing different scenarios of reduced RAM on specific CNEs. 

NP price outlook: hydrology dominates 

We have already seen some actuals for 2025, and there is a minor increase in consumption this year, although part of this lift is due to the very mild end to last winter. Consumption has only a minor effect on prices, as the bigger picture shows hydrology dominating the price outlook in the Nordic region. There is an extreme surplus of 80 TWh more production than consumption in the power balance across the four northern areas in Sweden and Norway.  

It is unlikely that the full 20 TWh surplus currently in hydro reservoirs and snow in the region will materialise as production this year. Hydro producers must retain much of it in the reservoirs for next winter, and some of it may be lost in the melting period, as prices during many hours this summer will not be attractive for production.  

In the southern areas of NP, the situation is more balanced. Even with significant power transit to Continental Europe, we see better price control in several southern areas. Still, we can expect many low prices during the melting season and low-consumption summer period.  

Continental prices remain significantly higher due to strong gas prices. Should we see major changes in weather trends, Nordic prices might connect even more strongly with Continental prices.