The European Commission’s latest reports on gas and electricity markets, which cover the second quarter of 2018, have just been published, containing a wide range of data about supply and usage of electricity and gas in the EU.
The electricity market report shows that the share of renewable sources in the EU electricity generation rose to its highest ever, 38%, owing primarily to good hydro and wind generation in most of Europe. Average wholesale electricity prices stood at 44 €/MWh, comparable with the previous quarter, but up by 18% year-on-year. In April 2018 the weather was milder than usual, contributing to decreasing residential demand and low monthly wholesale electricity prices in most of Europe. In contrast, high temperatures in June 2018 increased demand in many southern and eastern European countries.
In the second quarter of 2018, electricity consumption grew only moderately, by 0.3%, compared to EU GDP year-on-year growth of 2.1%. Among factors impacting electricity generation costs, natural gas prices were up significantly in year-on-year comparison, getting support from bigger injection needs in storages after the depleting impact of cold March weather, and from rising oil and carbon prices. Coal prices rose significantly over the quarter, owing to strong global demand for coal, especially in the Asian markets. Carbon prices kept on increasing but in June, market sentiment on trade issues between the EU and US weighed on the carbon price. Coal and gas consumption in power generation in the EU fell further, as increasing coal, gas and carbon prices did not contribute to any improvement in the profitability of fossil fuel technologies. Retail electricity prices for household customers increased by 4.5% year-on-year in June 2018 in the European capital cities on average, mainly driven by energy supply and network costs.
The gas market report shows that EU gas consumption decreased by 8% year-on-year, driven by mild weather and lower gas use in the power sector. The last time a year-on-year decrease of such a magnitude occurred was four years ago. Indigenous gas production decreased by 12% year-on-year. Imports increased by 3% year-on-year, as falling production and high injection demand offset the decrease in consumption. Russian pipeline supplies covered 46% of extra-EU imports, the highest quarterly share in the last five years. The EU's estimated gas import bill was around 21 billion euros, 29% more than a year earlier. EU LNG imports decreased by 2% year-on-year. Asian prices remained relatively high, especially in June, drawing cargoes away from Europe.
In May 2018 the Commission delivered its decision on Gazprom, regarding a set of obligations to enable the free flow of gas at competitive prices in Central and Eastern European gas markets. In June, it opened a formal investigation to assess whether Qatar Petroleum's long-term LNG contracts contain territorial restrictions. Despite the mild weather and the falling gas consumption, spot prices at European gas hubs remained high in the second quarter of 2018, driven by rising oil and coal prices and the strong injection demand.
18 October 2018