The Nordic and FR+DE power markets: “The fallen shall rise again?”

This winter weather has played a crucial role in the energy complex. A shift to warm, wet and windy weather together with full storages of gas and coal, high nuclear production and healthy supply rolled over the market like a financial crisis. It’s ironic that the climate change forces investment in the wind even from Hydro producers that results in a significant increase in market volatility and the risk for less profit. More wind into the Nordic market will increases the risk for lower prices in winter than during the summer…

According to climate experts will a stable warm, wet and windy winter take place more often. Low-pressure weather will last longer and so will dry and calm periods. This will push water values to new lows and highs and cause sub-seasonal weather to become a crucial variable to foresee market development.

In order to have the time to adjust for massive movements in the market over a short time period new risk analysis and ways to foresee sub-seasonal weather trends has to be developed. Even those with 20-30 years of experience in the markets must be “weather-tuned” …

The company has developed a Weather Regime Model (WRM) and combining that with traditional forecast and teleconnections energy weather trends and risk are foreseen far better than using traditional tools from leading market players:

“Trade Weather Power –” can support decision-makers with insight into energy weather trends and risk analysis:

  • From 23 of December, there were clear indications for a massive turn in the weather and as the market correction took place up to now there were no solid signs that the weather will turn
  • As seen the last two weeks hydro producers water values adjust faster and lower than many even believed were realistic
  • Warm temps, significant wind production and strong Hydbal (HPR) forces Hydro producers to lower water values to get reservoirs down before the spring in order to have space for a massive inflow period
  • The “mentality” of hydro producers before and after Christmas kicked in as weather turned WWW
  • What will happen if the weather seen last weeks last throughout March?…

Market outlook

  • The downside risk is still present and especially from March FR+DE can drop even further and together with a warm, wet and windy early spring over NC cause a new significant drop in NC-futures towards the summer
  • There will most likely be seen a shift to colder and calmer endings of forecasts soon that could result in a “weather” market correction – clients of the company get daily details if it last or turns back to warm, wet and windy again…

Best regards,

Ivan Føre Svegaarden