EU Power (Ger baseload)

August 28, 2020

The Research Team reviews the EU Power (Ger baseload) market

 

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28 August 2020 

  • Renewables will drop significantly into week 36. This is due to a sequence of low pressure areas towards southern Europe. The solar output will diminish while the southern track of the cyclones will push the strongest winds towards the Mediterranean. While rainfalls will be abundant during the first half of the 10-day forecast, precipitation rates will move below average later in the period. The precipitation index will remain just slightly below neutrality. Outages has been revised upward. France in particular is expecting >4GW between week 36 and week 37, which is an anomalous figure. Outages have also been increased for the reminder of the year, providing further support for a prolonged tightness.
  • The low pressure areas will make surface temperatures drop for much of continental Europe (next 10 days), providing little support for power demand. However, the decline in renewables will push the fossil fuels capacity utilization higher. Moreover, we continue to see a clear shift into a coal-burning mode (see the “thought of the week”), which makes German electricity more expensive and is conducive to a positive price development of the EUAs.
  • The encouraging signs that characterized the development of Q3 continue to emerge with the fresh August data on the PMI (53, 2 basepoint higher than July and back to the values of 2018). The positive trend is notably curbing, however, and it may further slow down, should new measures of lockdown be implemented. While the official data on the industrial production are lagging behind, we have provisional figures (such as chemical production) that tell a very similar story i.e. still on a positive trend but slowing down relative the leaps observed back in June and July.

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