Heat Records in Nordic Region Cut Power Prices to Summer Levels
(Bloomberg) -- Nordic electricity prices have fallen to levels last seen in July and August as unseasonably warm weather cut into demand that’s usually firming up at this point in the season.
Swedish forecaster SMHI said “extremely hot air” has moved into the region with the aftermath of tropical hurricane Zeta, which ripped through the Gulf of Mexico earlier this month. That curtailed power consumption at the same time that gusts increased output from the region’s growing fleet of wind farms.
“The reason we have summer prices is that we have almost summer weather,” said Arne Bergvik, chief analyst at Swedish utility Jamtkraft AB. “The mild weather continues into November, and if it’s not cold there are no winter prices.”
While that’s good news for everyone from consumers to the region’s energy intensive miners and forestry companies, it’s a pain for utilities from Fortum Oyj to Vattenfall AB already suffering from a slump in energy demand this year because of the pandemic, even though the region fared better than most.
Several Swedish towns and cities have set new temperature records for November, SMHI said.
The day-ahead price has slumped almost 90% this month from a year ago because of the stormy, wet and mild weather. Prices have dropped so low that earlier this week Vattenfall reduced output at some of its nuclear reactors. The region’s biggest utility, as well as some of its peers in Europe, are increasingly taking the measure when intermittent wind capacity is pressuring prices below levels where reactors are profitable.
See how much milder-than-normal it will be in the Nordic region, according to Bloomberg’s month-ahead weather model:
Prices even fell below zero for several hours on Monday in Sweden, Denmark and Finland.
Sweden is rapidly expanding in onshore wind as Vattenfall is closing down its old nuclear reactors. One unit at Ringhals on the west coast is set to shut permanently by the end of this year. Wind output so far in 2020 has jumped 40% from the same period the previous year, Bergvik said.
Negative prices, where producers have to pay for consumers to take the power off the grid, “will happen more often because of the rapid expansion of the wind sector,” utility Bixia AB said in a report on Wednesday.
The slump in prices isn’t just benefiting Nordic households, but those on the continent too because of a jump in exports to Germany and the Netherlands.
The Nordic region exported a net 1.8 terawatt-hours during October, compared with a net import of 0.4 terawatt-hours a year earlier, according to data from power exchange Nord Pool AS.
©2020 Bloomberg L.P.