The European Commission’s latest reports on gas and electricity markets, which cover the second quarter of 2019, have just been published, containing a wide range of data about supply and usage of electricity and gas in the EU.
The gas market report shows that, after a few quarters of decrease, consumption of natural gas in the EU rose by 20% in the second quarter of 2019, compared to the same period of the previous year. Consumption of gas increased especially in electricity generation (up by 39% in year-on-year comparison). As wholesale gas prices on the European hubs fell to several year lows, gas-fired electricity generation became competitive, and as carbon prices remained high, coal was squeezed out from the European electricity generation mix, leaving more room for renewables and natural gas. This higher gas consumption was satisfied by increasing imports, as domestic gas production in the EU continued to decline. Liquefied natural gas (LNG) imports in Q2 2019 practically doubled year-on-year, representing almost 25% of the total EU gas imports in this quarter, and in April and May LNG became the second gas import source in the EU, after Russia and temporarily ahead of Norway. By the end of June 2019 gas storages in the EU were filled at 73% of total capacity, the highest in the last eight years in this period of the year. High storage was helped by low spot gas prices, expectations on future price increases and security of supply risks stemming from the expiry of the gas transit contract through Ukraine, affecting Russian gas imports. Market actors are closely following the trilateral talks on the future of the gas transit on this route, with the participation of the EU, Ukraine and Russia.
The electricity market report highlights how intensive coal-to-gas switching continued across the EU in the second quarter thanks to falling gas prices and rising CO2 prices. In some countries, lignite-to-gas switching occurred as well. While EU-wide coal- and lignite-based electricity generation in the second quarter declined by 16% year-on-year, gas-fired power production jumped by 39%, displacing coal and mitigating very weak hydro output in southern Europe. In June, coal and lignite reached their lowest share in the EU power mix on record - 13%. As a result, thermal coal imports from outside of the EU fell by 22% year-on-year to 20.2 Mt, the lowest amount on record. The price of emission allowances rose by 20% in the second quarter, breaking multiyear highs on its way up. The withdrawal of allowances into the Market Stability Reserve, reduced supply stemming from UK volumes being blocked from entering the market and increased interest of wider investor community influenced price developments. Total combined output of solar, wind and biomass generation in the quarter increased by 7.5% year-on-year to 145 TWh. Wholesale electricity prices fell in most EU markets thanks to lower energy commodity prices and increasing renewable output. The European Power Benchmark declined by 19% compared to the previous quarter. A very rare event of decoupling of several west European day-ahead markets occurred on June 7, distorting cross-border flows and influencing wholesale prices from London to Bratislava that day.