German Politics, Dutch Quake Jolt Energy Prices
Energy prices in Europe were jolted January 8 first downwards by German politics and then sideways by the most powerful earthquake in the Netherlands in over five years.
German energy prices fell January 8 on reports that those negotiating the future coalition government had dropped a commitment to cut the country’s carbon emissions by 40% by 2020. But lower gas prices were offset by bullish news that the strongest earthquake in the Groningen area in over five years occurred at 3pm local CET time (2pm UTC), January 8.
Business newspaper Handelsblatt and news agency Reuters cited sources close to the centre-right union parties (CDU/CSU) and Social Democrats (SPD) who said that both sides had agreed to drop a pledge to cut carbon dioxide emissions by 40% by 2020, but would retain a goal of reducing them by 55% by 2030 – in both cases relative to 1990 levels. The reports emerged at about 2pm German/CET time (1pm UK time). The abandonment of the 2020 target would let generators in Germany burn coal and lignite with fewer contraints. Negotiators have now set a target of January 12 to complete their coalition talks.
German baseload power for calendar year 2020 was trading about €37.15 per megawatt-hour prior to 2pm CET but closed much lower at €35.95 , while power for 2019 fell from €36.60 at noon to €36.
“The Germany news triggered the power price in Germany and then gas followed,” a trader told NGW: “The earthquake news from Groningen didn't have an impact, or stabilised the downward trend.”
Power prices previously fell sharply mid-November when the Green party abandoned talks on forming a coalition with the CDU/CSU.
Europe’s main gas benchmark, the Dutch TTF, was firming slightly January 8 until about 2pm to €19.20/MWh for prompt gas, but closed that afternoon at about €19/MWh, whilst German gas hubs NCG and Gaspool followed TTF lower into the €18.85-18.95 range per MWh-gas.
Dutch media reported an earthquake at Zeerijp, with a magnitude of 3.4, which was only slightly less than the previous worst in the Groningen region on August 16 2012 at Huizinge (3.6 magnitude). Quakes there are recognised by the authorities as caused by gas extraction, so the latest tremor may revive calls for production to be reined in further, or even halted. A court late last year said the Dutch government must issue a new decision later this year on how much may be legally produced at Groningen. The interim production cap of 21.6bn m3/yr is only 40% of what was produced in 2013.