This week's focus seems to be on the current year and short-term forward year contracts, as in Week 23. Trading activity was focused on 2021 production products that had a 30% share of trades. This was followed by 2022 production volumes that accounted for a 32% share up down by 2% from last week's share. 2023 production vintages followed with a 20% share decreasing by 21% points when compared to Week 23. Trades even further along the curve were witnessed with the 2024 and 2025 vintage having a 20% (10 +10) share, indicating a decrease in interest in hedging forward year electricity consumption, for now.

Week 24 2022: price dashboard

Guarantees of Origin prices increased this week. Surprisingly, the highest price increase was witnessed in the Nordic Hydro 2021 production vintage that closed the week at an average price of 123.5 Eurocents/MWh, up by more than 17 Eurocents when compared to the previous week. The Nordic Hydro 2024 production vintage followed with a 15 Eurocents increase, closing the week at an average price of 239.5 Eurocents/MWh. Meanwhile, prices for the Nordic Hydro 2023, and 2025 vintages increased more moderately, closing the week at 232.5, and 242.75 Eurocents/MWh respectively.

On the contrary, the current year Nordic Hydro 2022 production lost ground, precisely 3.95 Eurocents/MWh, or 1.98%.

Nordic (Norway, Sweden & Finland) hydrological reservoir levels given in the second slide show a notable increase of 5% in reservoir levels in Week 23 of 2022.

Week 24 2022: Nordic hydro

Forecasted Nordic Hydro production and inflow levels (Weeks 25-26)

A higher than normal inflow is expected in the Nordic region in the coming Weeks 25 & 26, with levels forecasted to be 7% above the norm in Week 25 and 16% above in Week 26. Precipitation levels are expected to increase in Week 25, with rainfall levels expected to be 27% above the norm and further contributing to the recovery of reservoir levels. Nordic hydro production is expected to slightly increase in the coming two weeks, with production next week forecasted to be 5% above normal production levels in Week 25.

Iberian Peninsula (Spain & Portugal) hydrological reservoir levels given in the first slide show slightly lower reservoir levels in Week 23 with reservoir levels decreasing by 0.7% when compared to the week prior. In Central Western Europe, Week 23 reservoir levels increased by 5%, keeping the levels above median levels by 7.3%.

Week 24 2022: EU Hydro

Forecasted EU Hydro production and inflow levels (Weeks 25-26)

Hydro production across the Iberian Peninsula (IB) decreased this week by 0.7% when compared to the week prior, while in Central Western Europe (CWE), hydro production increased by 5% possibly due to high precipitation in Week 22.

In the Iberian Peninsula, water reservoir levels are projected to decrease further, reaching 41.3% in Week 26, due to an expected decrease in inflows and unstable precipitation levels. By Week 26, inflows are projected to be 77% below the norm, and hydro production 31% below the norm as well.

Water reservoir levels in Central Western Europe are projected to increase further, reaching 66.2% in Week 26. Hydropower production is forecasted to remain steady (around 18% below the norm), due to constant low inflows and stable precipitation levels.

This week saw stable prices in the Spanish domestic market for current year products but slight increases were witnessed in the forward markets. Prices for 2022 GOs for unspecified renewable energy were trading at an average price of 190 Eurocents/MWh similar to levels seen weeks prior. Additionally, on Monday prices for 2022 Spanish domestic biomass GoO products were seen trading at a slight discount closing at 170 Eurocents/MWh.

In the forward markets, GoO prices for Spanish domestic 2023 production for unspecified renewable energy (excluding biomass) saw slight price increases closing the week at an average price of 212 Eurocents/MWh up by 7 Eurocents when compared to Week 23.

The spreads between domestic Spanish GO prices and the benchmark Nordic Hydro prices for 2022 production narrowed slightly at 7 Eurocents compared to the 10 Eurocent spread witnessed last week. Market sources have mentioned that the slight narrowing of the spread is due to an uptick in market activity this week with some market participants being more focused on trading in the domestic markets. Furthermore, predictions on domestic 2022 prices for the coming week are predicted to remain stable between the 190-200 Eurocents/MWh range.

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The European biomethane certificate markets ended week 24 with mixed signals. The continental market was sluggish, compared to the previous week, with mid-range prices of all biomethane certificate types remaining flat. For the UK RGGO, the market was more active with prices swinging for both types of certificates. While the mid-range price of UK RGGO Crop increased by 5%, the price of RGGO Waste contrarily decreased by almost 3%, standing at 20.50 GBP/MWh.

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The EUA Dec-22 contract traded slightly upwards during the first half of the week, while sliding global equity markets on fears of a nearing recession erased most of the gains on Thursday (16 June). Surprisingly the benchmark carbon contract held stable around the €80/t mark despite last week’s Parliament rejection of the EU ETS file and the bearish macro picture. Tuesday and Wednesday resulted in substantial gains on the back of Parliamentarians in the Environment committee (ENVI) deciding to resubmit all amendments voted on during the previous plenary session. The EUA Dec-22 contract closed Wednesday’s session at €86.2/t. The next vote is scheduled as early as 22 June with different political groups trying to secure a more solid majority for compromise amendments and the final votes. Reportedly EPP, S&D and Renew agreed on a deal including a CBAM-related phase-out of free allowances between 2027 and 2032, adding ambition compared to last week’s plenary voting. The agreement also includes minor adjustments to the linear reduction factor with the LRF starting at 4.4% in 2024, 4.5% in 2026 and 4.6% in 2029. Meanwhile, member states in Council discuss the file with a view to adopt a position during the 28 June Environment Council meeting. For most parts of the ETS review, the Council draft shows high alignment with the original Commission proposal. It looks that negotiators in Council aim to delay the yet-to-be introduced ETS for buildings and transport to 2027, one year later compared to the Commission proposal. The unusually high interest rate hike by the US Federal Reserve sent global equity markets lower on Thursday on recession concerns. Despite higher gas prices, the EUA-Dec22 contract lost ground and closed the session at €83/t. Further downside cannot be ruled out, potentially testing the €77.38/t support level during the next days. The Parliament vote on 22 June will be closely watched by the market in addition to any moves of the highly volatile gas market.

The wider energy complex was largely impacted by the significant reduction in Russian gas flows via the Nordstream1 pipeline. Gazprom claimed maintenance issues as the main reason for cutting gas flows twice this week, resulting in an overall reduction of flows by 60%. A statement that was claimed as technically unfounded by Germany’s economy minister Habeck. As a result, the Dutch TTF gas front-month contract jumped on the reduced gas flows and ended Thursday’s (16 June) session at €124.36/MWh, posting a hefty 46.5% increase week-on-week. The German power Cal’23 followed higher, ending Thursday’s session at €240.51/MWh, 3.9% higher week-on-week with an intraweek settlement low of €219.78/MWh on Monday.

During this week, we have seen a steady rise in forward year trading but current year production has lost ground during the end of the week, for all observed technologies. At the time of writing this article, we are actually uncertain if this trend is likely to continue or not. Nonetheless, as reservoir levels continue to recover in the Nordics and the rest of Europe (excluding the Iberian Peninsula), we can expect Hydro production to pick up, and with European wind production being also on the rise, this may have a downward effect on prices in some regions, that we already witnessed a bit as stated above. This will largely depend on when producers sell their available volumes to the market, which seems to be the case given the losses for the 2022 vintage.

Additionally, some market players report that buyer activity in some markets has remained fairly low post-March disclosure deadlines as some market players have been more focused on the physical commodities markets. This is still the case. As a result, market activity continues to decrease this week with fewer trades and traded volumes, decreasing for the fifth week in a row.

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Prices for Nordic Hydro for past and forward vintages increased this week with the highest price increase witnessed in the 2021 vintage.

Recorded transactions and volumes decreased by 64% and 58% with 2022 production GOs having the largest share of recorded transactions this week.

The Nordic hydropower reservoir levels continue to recover, having increased by 5% in Week 23 of 2022.

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GO Week 24 Overview - Nordic forward prices increase is significant

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