LONDON: German wholesale power prices have rallied each summer since 2009 and then slipped into lengthy downturns and leading economic indicators point to a repeat this year.
German power prices for baseload (24 hours) delivery in 2013 have risen by more than 5 percent this month to above 50 euros per megawatt-hour (MWh), their highest level since May.
The market saw similar rallies in 2009, 2010 and 2011 but forward power prices in each case then fell by 10 to 16 percent between August and December.
Germany's highly industrialised economy means its power market is strongly influenced by industrial demand, and leading indicators as well as economic data from Europe's biggest economy suggest that a similar downturn may lie ahead for electricity prices this year.
Germany posted modest economic growth in the second quarter and France stagnated, suggesting the eurozone as a whole contracted over the three months, a downturn that Germany is unlikely to be able to defy for long.
Germany eked out growth of 0.3 percent over the quarter, marginally beating forecasts, but economists said it could soon succumb unless decisive action is taken to tackle the currency bloc's debt crisis.
More up-to-date evidence from the third quarter has shown declines in German manufacturing orders, industrial output, imports and exports.
Germany's forward-looking ZEW sentiment index dropped by 5.9 points in August to minus 25.5 points.
"Germany is not managing to decouple itself from the rest of the eurozone and several indicators lead us to expect that economic performance will slightly decrease in the third quarter," Bernd Hartmann of VP Bank said.
Power traders said that such developments would almost certainly impact the electricity market.
"If the German economy tanks, there is no way that power prices will be able to sustain the rises we've seen earlier this month," one utility trader said.
Comments
Comments are closed for this article.