Oil Glut, Renewables Make EU Power Cheapest

Oil Glut, Renewables Make EU Power CheapestOil Glut, Renewables Make EU Power Cheapest

Record-low coal prices and increased wind and solar generation that pushed European power prices to their lowest in a decade may cause further declines in 2016.

Average day-ahead electricity prices in Germany, Europe’s biggest market, fell 3.2% to $34.65 per megawatt-hour in 2015, the least since 2004 on the Epex Spot SE exchange in Paris before the last auction later Wednesday.

Northwest Europe coal fell 33% while the share of Germany’s energy demand met by renewable output increased by four percentage points to 30%, according to preliminary figures by utility lobby BDEW, Bloomberg reported.

“It is a double whammy from lower fuel prices and renewable development that we expect will continue next year,” John Brottemsmo, head of analysis at Bergen Energi AS, said by phone on Dec. 15. “Wind and photovoltaic generation has increased while prices for coal and gas have dropped.”

The decline is set to continue across Europe as prices for fuel and carbon emissions remain low, according to Christian Holtz, an analyst at consulting firm Sweco AB. German power for next year, a European benchmark, traded 11% below the 2015 delivery price, at €28.30 per megawatt-hour on Tuesday, according to broker data compiled by Bloomberg.

Nordic day-ahead power dropped 29% to $23 per megawatt-hour, the lowest yearly average since 2000, when record precipitation in the region pushed down prices to $14.75 on the Nord Pool Spot AS exchange in Oslo.

That came amid above-average rainfall that filled up hydro reservoirs used to produce more than half the region’s electricity and record wind power production of 16.5 terawatt-hours in Sweden, according to Brottemsmo.