Lack of wind pushes Europe’s power prices higher, just as cold sets in
Credit: Yusuf Khan | Dec. 2, 2022 | wsj.com ~~
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Amid a sharp pivot from its reliance on Russian natural gas, Europe has built up large reserves of stored gas ahead of this year’s heating season. That has helped ease power and gas prices recently. A particularly mild spell of weather across the continent also helped by pushing back gas withdrawals and keeping stockpiles topped off.
Now, though, colder weather in many places is kicking in at the same time wind speeds have fallen, bolstering demand for gas while reducing the ability of wind farms to generate electricity. This week, wind speeds in Hamburg fell to around 5 meters a second, or about 11 miles an hour, according to the weather forecasting site windy.com. That is the minimum speed required for electricity generation. Speeds of around 15 meters a second, or 33 mph, are needed to produce maximum power generation.
The sort of high-pressure systems dominating Europe at the moment tend to result in less wind, said Evangeline Cookson, meteorologist and research analyst at Marex Spectron. Such anomalies in wind speed aren’t particularly unusual. But this one is coming at a time when European governments are observing energy use as they navigate their first winter largely without Russian gas.
It also comes at a time of extra sensitivity among consumers and companies to soaring energy bills. Energy traders have been unusually focused on the weather because it can dramatically affect gas supply and demand.
Governments and energy companies have sought clues about the severity of this winter in longer-term weather outlooks. They are less precise than shorter-term forecasts: Two of the most closely watched have so far come up with different projections for the next three months.
The still spell also comes as France, a key power exporter in Europe, is struggling to get a big chunk of its fleet of nuclear power plants up and running after maintenance issues. Meanwhile, hydropower generation has also struggled. River levels dropped to multiyear lows after the continent experienced a scorching summer.
Day-ahead power prices in Germany for Friday were at 361 euros a megawatt hour, equivalent to $377, up from €108 in the middle of last month, according to data from European Energy Exchange AG. Natural-gas prices have also risen sharply given the extra demand, with benchmark Dutch TTF prices on Thursday sitting above €158 a megawatt hour, having sat at €123 a megawatt hour at the start of the week.
Ms. Cookson said that for wind power generation, westerly winds over north Germany and France are ideal. That is where the highest concentration of wind turbines are installed in Europe, built there to take advantage of the typically prevailing wind direction.
Instead, the region has been seeing the exact opposite this week—high-pressure weather patterns bringing weak, northeasterly winds.
“This northeasterly wind flow is bringing weaker winds and colder temperatures, upping demand for heating,” she said, adding that this weather pattern is likely to continue over the next 10 days.
The spell of light wind is underscoring a key weakness in Europe’s energy infrastructure. While the continent has invested heavily in wind and solar power, it doesn’t yet have much capacity to store such energy and smooth out power generation over periods of little wind or sun. Battery storage technology for renewable power generation allows utilities to store excess energy produced from solar panels and wind farms, but it is still a developing field.
Before last year, with energy prices sitting at low levels, there had been little incentive to improve European storage facilities, Anna Darmani, lead energy storage analyst at energy research and consulting firm Wood Mackenzie. Modo Energy, an energy-storage data company based in the U.K., estimates Britain has just over 1.4 gigawatts worth of installed battery storage. The country’s National Grid, which manages its power network, has said it needs 13 gigawatts of storage by 2030 to help balance the volume of electricity generated from wind and solar projects.
“Historically, Europe has lagged behind China and the U.S.,” Ms. Darmani said, adding: “We need more storage to balance the supply and demand as we go forward, but these projects take three to four years to come online and there are no guarantees prices will stay high.”
During the summer, there were also curtailments in energy supplied by renewable sources to the grid in Europe, because even though conditions suited solar generation—a lack of battery storage meant that the energy had to go to waste since it wasn’t required by the grid at the time, Ms. Darmani said.
“You have to deploy more renewables but you also have to deploy more enabling technologies, like batteries,” said William Andrews, the chief executive of Infra Balance New Energy, a battery storage firm based in the U.K., echoing the point that storage acts as a steppingstone to a greener grid.
“You have to do it hand in hand,” he said.
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