S&P Global Ratings study – ‘Midyear 2020 Update’ has found that power prices in main Europe markets duration 2020-2021 are currently up to 20% lower than the last review in November 2019, due to Covid-19 disrupt
A key finding of the research suggests that spot prices are likely to remain low as European power prices have weakened since the start of 2020 by an average 5%-7% drop in demand due to a mild winter, Covid-19 lockdowns, increased renewables supply, and a drop in commodity prices.
The financial impact of the lower prices on European power generators is generally manageable in 2020, due to price hedges, the study suggests. However, generators' hedging positions are less secure for 2021, with only 30%-50% of total power generation contracted on average.
The research has also found that renewables will play a greater role in power price formation over the next decade, supported by EU leaders' recent commitment to the European Green Deal.
However, S&P predicts that the growth of renewables will require more weather-related price volatility, similar to when above-average wind and hydro production reduced power prices earlier in 2020.
S&P Global Ratings’ biannual report focuses on insights for Europe's key utilities and power markets: Germany, France, UK, Italy, Spain, and the Nordics, while also demonstrating each market’s future generation mix and notable market developments.