Dunkelflaute: Europe’s Electricity Prices Soar to Record Highs Amid Cold, Windless Weather
The combination of low temperatures and a lack of wind has driven electricity prices to record highs in Germany, with consumers expected to pay an average of €395 per megawatt hour (MWh) on Thursday, the highest value since December 2022.
The cold weather, known as a Dunkelflaute, has led to a significant increase in demand, while the lack of wind power generation has resulted in an overreliance on more expensive combined cycle plants that burn gas to generate electricity. This has pushed prices to levels not seen since the 2022 energy crisis.
According to Montel, Germany’s powerful wind power sector usually generates around 20 gigawatts (GW) of power during this time of year, but on Wednesday, it only produced 3 GW, with cloudy skies also reducing solar photovoltaic power output. As a result, combined cycle plants have had to operate at a higher rate, driving up prices.
The wholesale electricity market in Germany has exceeded €936 per MWh in some parts of the day, the highest figure in 18 years. The current situation is not unique, as a similar episode occurred in November, when the price of electricity rose above €800 per MWh before later falling back down.
The reliance on combined cycles to meet demand has also had an impact on gas storage levels, with Germany’s reserves currently at around 87% of capacity, down from 98% in early November. The average European gas reserves have similarly fallen to 80% of capacity, with a 15-percentage-point decline over the last five weeks.
While reserves are expected to be sufficient to get through the winter, the rapid depletion may augur more difficulties in refilling tanks for the next cold season. The energy consultancy ICIS estimates that gas storage levels will close 2024 at around 70% and be at around 33% capacity by the end of March, when the cold season typically ends and renewable generation is reactivated.
The market is signaling a gas supply shortfall by 2025, according to Francisco Blanch, head of commodities and derivatives analysis at Bank of America.