Moody’s sees German power prices normalising in 2023, 2024

High-voltage power lines and electricity pylons are pictured during sunset near the southern German city of Ulm, November 7, 2006. REUTERS/Alexandra Beier

FRANKFURT, Nov 30 (Reuters) – Moody’s Investors Service in a report on Tuesday pegged German wholesale power in a range of 70-90 euros ($79.44-102.13) per megawatt hour (MWh) across the board through to the end of 2023, saying commodities prices should normalise from currently high levels.

German year-ahead baseload electricity, which is Europe’s benchmark, should average 84 euros in 2023 and 82 euros in 2024, the forecast said.

Electricity forwards have trebled this year in response to factors including unprecedented gas price surges, partly caused by Asia’s economic recovery from the coronavirus pandemic, gains in European carbon emission permit costs, firmer oil and low local renewable output.

The German year-ahead contract on Refinitiv Eikon platforms stands at 140.7 euros , while the 2023 position last traded at 99.3 euros and 2024 at 84euros.

Power prices should remain high during 2022, Moody’s said, citing tight European gas stocks and the closure of Germany’s nuclear fleet at the end of the year.

Marcus Ferdinand, analyst at Thema consulting, said in a separate interview he upholds a CO2 price range between 60 and 65 euros a tonne, also citing gas and coal prices, inventories and cold weather.

Power generators must hold CO2 allowances to cover their output.

Moody’s analysts saw price pressure in coming years, due to the growth of renewable capacity, as governments demand a faster roll-out to meet new climate targets.

In France, whose power market is linked to neighbouring Germany’s, the Flamanville 3 reactor could start up operations next year.

Gas storage levels in the region should be replenished, helped by the likely commencement of operations of the Nord Stream 2 pipeline shipping Russian gas to Germany directly.

The scenarios should benefit power generators with a high share of low-carbon and fixed-cost generation such as Fortum (FORTUM.HE) or Verbund (VERB.VI), Moody’s said.

($1 = 0.8812 euros)

Reporting by Vera Eckert, additional reportig by Forrest Crellin, editing by Miranda Murray and Ed Osmond

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