Germany’s Power Prices Hit Record-High As Utilities Limit Output

Germany's year-ahead electricity prices hit a record high on Friday after several utilities across Europe warned of lower power supply due to hot and dry weather that affects nuclear and coal power generation. 

The price of electricity in the biggest market in Europe, Germany, rose by 2% early on Friday to a record $419 (410 euro) a megawatt hour (MWh), per Bloomberg estimates.

More and more utilities in Europe are looking to switch to fuels other than natural gas because of sky-high prices and uncertainty in Russian supply as the continent scrambles to fill gas storage sites ahead of the winter.

But coal supply is constrained due to low water levels on the Rhine River, a major coal and fuel transportation corridor in Europe.

Power prices were further pressured upward on Friday by an announcement from Switzerland's Axpo Holding, which is reducing output at the Beznau nuclear power plant because of restrictions on using warm water to cool reactors. France's EDF has warned for weeks its nuclear power generation in France would be reduced as high temperatures of rivers Rhone and Garonne make them too hot to cool reactors.  

Utilities in Germany, for their part, are warning that some coal-fired power plants could see irregular operations for a month because of limited coal supply due to low water levels on the Rhine, which complicates transportation of coal via barges.

According to notices posted on the power bourse EEX, Germany's energy giant Uniper - the one the government bailed out last month with a $15-billion package - warned that units at two coal power plants it operates could experience irregularities until September 7.

The hot and dry weather in Germany is expected to continue for weeks, which could see German and European power prices climb even higher ahead of the winter if utilities continue to limit power generation.

By Tsvetana Paraskova for Oilprice.com

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