Last week, the daily share of wind in Europe’s electricity mix hit a new record high in 2022. Wind power accounted for about 31pc of the continent’s electricity generated on 7 April, according to WindEurope. In contrast to 2021, when reduced wind production added to bullish sentiment across European gas hubs, regional wind farms have so far this year performed pretty well.
TTF prompt gas contracts lost value in the last five trading days, not least because above-normal wind levels capped demand for CCGT production over the period. Indeed, the impact of windy weather on the region’s gas market can hardly be overestimated given a high correlation between wind power and gas-fired generation within NWE. This is seen plainly in the example of Germany, which is home for the largest number of the continent’s wind turbines. The general pattern is that when the country’s wind power output climbs higher gas generation share of stack declines, and vice versa.
Both NWE and South Europe have seen higher wind’s contribution to their electricity mix between 1 January and 10 April 2022 as compared with the same period in 2021. The share of wind energy in power demand increased year-on-year in the Netherlands, France, Spain, Italy, and the list is longer.
High wind generation could not have come at a better time for the European gas market. It is quite likely that the region’s gas stocks would now stand at lower levels if in the first quarter of 2022 wind power output had remained the same as last year, even with this winter’s warm weather. In reality, however, more electricity produced by wind farms helped to limit gas-fired power demand.
This year, wind output is becoming a particularly important variable influencing gas price developments across Europe. The EU gas storage targets, together with the agreed ban on Russian coal imports, have narrowed the range of supply options available to players during the summer season. And it is wind (as well as solar) power that can add some needed flexibility to the region’s energy system.
Source: Yakov Grabar (LinkedIn)