Weather is becoming a crucial price driver for the Nordic power market

The market was taken by surprise during the Christmas holidays – is full of comments from analyst and traders talking about the massive drop in the market. From hope of cold spells to massive warm, wet and windy (WWW) trend caused something the market has not seen before. The massive drop in water values and its projection on power futures has resulted in one of the biggest sell-off in recent history. Both gas, coal and CO2 have been hit by warm temps in EU and NC power markets. No fundamental analysis or tool from any leading market players did show that massive drop, even as it took place! Traders and analyst must “weather-tune“ their understanding and knowledge about the Nordic power market. Without taking weather into their strategies and risk handling unnecessary losses will take place.

  • The Nordic power market limited connection (periodically significant) to Europe and much more wind in the Nordic system (also in 2020) will have a stronger impact on spot prices and futures as ever seen before

  • The new climate with precipitation up to 1000 meters in Dec/Jan with increased inflow and massive wind will push spot prices and futures to new lows and increase volatility during wintertime

  • Nordic hydro producers must fight with more wind pushing water values down faster and lower than seen before in order to sustain production until spring arrives

  • During massive WWW periods as seen now, spring kicks in 1-2 moth earlier than normal pushing extra pressure on spot and futures since Hydbal (HPR) can reach a surplus of 25-35 Twh before the snowmelt starts in major hydro areas