(Bloomberg) -- A rally in European electricity prices is likely to keep going next year, supported by tighter supplies as coal and nuclear stations shut.
German year-ahead electricity, a benchmark for the continent, has risen more than 300% this year and continues to trade near record levels.
The contract slipped 2.5% to 201.25 euros per megawatt-hour by 12:45 p.m. local time as the rally in natural gas stalls, though it's still trading almost 8% higher this week. The recent drop isn't necessarily indicative of a longer-term trend for power prices, which are also affected by the cost of carbon and electricity generation capacity.
“Tight gas balances, carbon-cost volatility and shrinking atomic and thermal output may offer price support as low-cost renewable capacity expands longer term,” Bloomberg Intelligence analyst Patricio Alvarez said in a research note. That's set to benefit low-cost baseload power generators such as Electricite de France SA, Verbund AG and Vattenfall AB, he wrote.
Read More: What's Behind Europe's Skyrocketing Energy Prices: QuickTake
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