Average wholesale gas prices in Q3 were 115% higher than in the previous quarter, 18% higher than the previous record-breaking average gas prices of Q1 2022, and more than double those seen in Q3 2021.
This was the standout highlight from the latest report on the European energy market from data analyst EnAppSys.
The record gas prices were driven primarily by continuing conflict in Ukraine and the changes in the gas flows through Nord Stream 1.
Firstly, Russia shut down the pipeline’s gas flows to Germany for maintenance in July for ten days. Following the conclusion of the maintenance, gas flows through the pipeline were reduced to just 20% of capacity in August and by September flows were halted indefinitely.
Towards the end of September, gas leaks were observed at both Nord Stream 1 and the as-yet unused Nord Stream 2, meaning that the pipelines are likely to remain out of use for an extended period.
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These events saw gas prices in Q3 climb from the €145.48/MWh seen at the close of Q2 to reach a peak of €308.18/MWh by the end of August. By the end of the quarter, however, gas prices fell back to €159.40/MWh as gas storage facilities were filled with reserves.
Soaring gas prices saw some countries, including Germany, Spain and the Netherlands, favour coal-fired generation rather than gas during the quarter.
High temperatures in the first half of the quarter caused further issues in the French nuclear fleet, further squeezing European energy supply and ensuring that France remained a net importer of energy.
Meanwhile, a drought in Norway reduced hydro generation in this country and reversed the flow of its interconnectors from a net export to a net import position for extended periods.
Jean-Paul Harreman, director of EnAppSys BV, said: “As with the previous two quarters, Q3 2022 was impacted by the war in Ukraine and the unfavourable climate conditions that affected hydro and nuclear energy generation in Europe.
“Since Russia began the invasion of Ukraine in March, gas supplies to Europe have been reduced significantly and, as of early September, supplies to Nord Stream 1 pipeline were completely stopped.
“With the explosions at both Nord Stream 1 and 2 later in the month, it’s clear that there will be no flows through the pipelines any time soon.
“The pressure from all of these factors has resulted in increased gas prices across the continent. Due to the soaring gas prices in the EU as well as a multitude of other factors such as the EU’s higher dependency on Russian oil, wholesale electricity prices relative to prices in the GB market have become even higher for many EU nations.”
The third quarter saw the lowest hydro and nuclear output of any Q3 in the last five years with 89.9TWh of hydro and 145.7TWh of nuclear generated across the continent.
Renewables saw an 11% increase compared to Q3 2021 and fossil fuel generation was 6% higher than in Q3 2021, reversing a decline seen in recent years.
French nuclear was the biggest contributor to Europe’s fuel mix in Q3 2022, producing 22.3% of the total. Gas was the next largest contributor with 21.5%, followed by coal/lignite (17.9%), hydro (13.8%), wind (11.0%) and solar (8.9%). Biomass (3.5%), waste (0.6%), oil (0.3%) and peat (0.1%) made up the rest of the total.
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Great Britain boosts gas production
Britain produced its highest third quarter levels of gas-fired generation since 2011, despite soaring gas prices which pushed up electricity bills for businesses and households.
The 31 TWh of gas-fired output produced during the quarter helped to meet high demand for exports from GB to Europe through interconnectors with France, Norway, Belgium and the Netherlands. This was a consequence of problems with the French nuclear fleet, a Europe-wide drought and higher gas prices on the European mainland.
Britain continued to be a net power exporter again this quarter, having become a net exporter for the first time in the previous quarter. Total net power exports from the GB interconnectors in Q3 stood at 4.59TWh, a 26% increase from the previous quarter.
Paul Verrill, director of EnAppSys, said: “This quarter saw increased pressure in the GB electricity market as gas prices resumed their escalation, having fallen in the first half of the year following the initial spike in prices at the outbreak of the war in Ukraine. The consequent increase in generation costs during Q3 led to a rise in wholesale power prices, with all-time high averages for day-ahead, within-day and system prices.
“Nevertheless, gas prices and electricity generation costs were generally more favourable in GB than in mainland Europe, so GB remained a net exporter this quarter. This was primarily due to GB’s lower dependency on Russian gas imports than other European countries. Most of GB’s gas is produced in the North Sea, while imports come mainly from Norway. LNG imports come from Qatar and the US, meaning that very little GB gas has historically come from Russia. This means that GB has been more shielded from the worst of the recent gas spikes than many of its European neighbours which do not have LNG import facilities.”
