Europe’s Power Prices Fell in January as Weather Came to Rescue

(Bloomberg) --

Weather came to the rescue of Europe's sky-high power prices this month as milder temperature eased near-term costs.

Daily power prices fell to the lowest average in three months as relatively warm and windy weather eased the strain on power across the continent.

“Favorable weather can shield power consumers from the effect of rising commodity prices,” said Kesavarthiniy Savarimuthu, a European power analyst at Bloomberg NEF.

The average day-ahead power price in the German market, a benchmark for Europe, reached 167.73 euros a megawatt-hour, according to Epex Spot. That's the lowest price since October, even though it's still more than triple last January's average of 52.81 euros.

The price of power has largely been at the mercy of high gas prices, triggered by a continental supply shortage worsened by low imports from Russia. Weather plays a large part in determining the near-term price of power, as prices rest heavily on demand for things like electric heating and on generation from renewables like wind.

Germany to Get Mild, Windy Weather for Most of February: DWD

German weather stayed relatively warm, helping to ease demand for power in the market that's weighing heavily on household spending and triggering government intervention to limit bills. January stayed largely above the 30-year average temperature, according to data compiled by Bloomberg.

Futures prices for the next several months remain much higher than historical averages. Nearer-term costs will depend on demand and renewables generation closer to the time when the power will need to be delivered.

German historical weather chart:

Longer-term power prices also fell on Monday, with German month-ahead power dropping as much 11.1% in early trading to 180.50 euros a megawatt-hour. The country is set for more mild and windy weather during February, national forecaster DWD said on Friday.