Forward Prices Driven Up By CO2, Coal, Forecasts

Posted by Michelle Howard November 10, 2014

Europe's forward power curve on Monday afternoon rose due to gains in coal and carbon prices and to forecasts that cold temperatures will set in from next month, traders said.

Germany's Cal 15 baseload power rose 40 cents or 1 percent to 34.70 euros a megawatt hour, the highest in five weeks. The equivalent French contract, Cal '15 baseload, was up 15 cents at 42.65 euros/MWh.

"Coal has rebounded, and a cold winter, if sustained, would boost the year-ahead power position," one trader said.

Coal bounced off the 7-1/2 year lows hit early on Friday, with the year-ahead north Europe delivery price at $71.30 a tonne on broker pages. This compared with $70.55 in the previous API2 index.

Mild weather, high supply and slowing demand had triggered lows in the coal market, so any indication of cold weather was likely to boost usage predictions for coal and mandatory carbon permits, which power generators must hold to cover their emissions.

Dec '14 expiry carbon permits were down 0.74 percent at 6.71 euros a tonne after reaching an intraday high of 6.81 euros.

Spot power prices, by contrast, fell ahead of a French holiday, which curbed demand along with relatively warm weather and as supply remained healthy.

German baseload (24 hours) power for delivery on Tuesday was down 4.50 euros from the price paid for Monday at 35.50 euros ($44.30) per megawatt-hour in early trading.

The equivalent French contract was down 7.50 euros at 32.50 euros/MWh, but the next working day, Wednesday, was at 44 euros.

Point Carbon analysts noted higher renewable production from wind and solar installations, improved thermal availability in Germany and a bearish impact from France.

Point Carbon expects temperatures over a 24-hour average to Tuesday to rise by 0.3 degree Celsius in Germany and by 0.8 degree in France, where this and the holiday will knock some 3 gigawatts (GW) off consumption on Tuesday.

Consumption in Germany is forecast to remain around 66 to 67 GW each day this week, while thermal operators are tapping more gas- and coal-fired capacity.