The extremely dry and cool winter, which has dominated the Nordic area recently, has affected the hydro balance. A balance which as recently as in early February was in a solid double-digit surplus, and where it appeared as if the hydro power producers could once again look forward to a year, where they would not be pressured on production.
This would however not be the case. Most of Europe, according the Nordic area, was struck by a heavy cold wave in the second half of February. The cold wave was the result of a high pressure, which also caused very limited amounts of precipitation. The combination of the low precipitation and the increased consumption, which was caused by the low temperatures, meant that the surplus of the hydro balance dropped from 17 TWh to 3 TWh in a matter of just a couple of weeks.
Following the cold wave, the balance improved slightly again, but the recent weather forecasts indicate, that very dry and cold weather is on its way in the second half of week 11 and in most of week 12. This has started pressuring the hydrological situation in the Nordic area again. According to analyst agency Thomson Reuters, the hydro balance will drop in to a deficit in the end of March, the first time this happens since September 2017.
The pressure on the hydropower producers in the Nordic area is bad news for spot customers. February was the most expensive month on the spot market for almost five years, and with big consumption and limited hydrological resources to cover the demand, it looks like March could be even more expensive. The average system price for February was 39.58 EUR/MWh. Half way through March, the average price level of this month is approximately 45 EUR/MWh, and the high price levels could very well continue throughout the month.
July 12 2018. When the annual contract for 2018 closed for trading in December last year, it cost around 25 EUR/MWh. Now however, it looks like the average system price of the year could turn out to be 45 EUR/MWh.