The war in Ukraine has driven gas and electricity prices to record levels. What signals are coming from the electricity exchanges? How full are the Swiss reservoirs? All important energy data updated daily.
“It’s all about the whole thing”: Federal Councilor Simonetta Sommaruga used this sentence in June to warn of a shortage of gas and electricity in winter. The energy supply is still working, but the following charts show that the tension is great, especially on the electricity market.
There is a “fear barometer” on the electricity exchange. It is the futures market for the first quarter of 2023. The price on this market shows what you have to pay today if you want to buy electricity produced in Switzerland for the first quarter of 2023. This late phase of winter is considered to be particularly susceptible to a power shortage because the reservoirs are already largely empty.
This price has risen sharply since the beginning of July – in Switzerland and the neighboring countries Germany and France. The higher the price, the more tense the situation. Before the crisis, electricity cost 50 to 100 euros on the exchange. On the futures market, a multiple of this will be paid for the first quarter of 2023 at over 1000 euros.
But how much does electricity cost at the moment, if you disregard the risks in the future? This can be seen on the spot market, where quantities of electricity that can be delivered at short notice are traded, specifically for the next day in the graphic. The price here was 40 to 70 euros per megawatt hour until mid-2021, but there has been a sharp increase since autumn 2021. Since Russia’s attack on Ukraine in February 2022, prices have fluctuated sharply at a high level.
Switzerland is in the fortunate position that, unlike Germany, for example, it has many reservoirs that can store almost 9 terawatt hours of electricity, which corresponds to a good quarter of Swiss consumption in winter. It is therefore important that the reservoirs are well filled at the beginning of winter.
In winter, Switzerland obtains an average of around 5 terawatt hours of electricity from abroad, mainly from Germany and France. The French electricity mix consists largely of nuclear power. That could become a problem this winter, because around half of France’s nuclear power plants have been taken off the grid for maintenance work. The production of nuclear power is correspondingly low compared to previous years.
The Swiss electricity mix is practically CO2-free, as it is dominated by hydropower and nuclear power. In Germany, on the other hand, 40 percent of electricity was still produced with fossil fuels in 2021. In addition, the last three German nuclear power plants are to be shut down at the end of 2022, which will further increase the power shortage in winter.
Closely coupled electricity and gas market
Gas and electricity prices develop in parallel on the spot market. This is because the very flexible gas-fired power plants in Europe are used to cover peaks in electricity demand. The production costs of the gas power plants therefore often determine the market price. In the spring of 2021, gas prices were still 15 euros per megawatt hour. The recovery of the economy and the drastic reduction in gas supplies by Russia have caused the price to explode – which is also pushing up electricity prices.
The production of electricity with natural gas is only possible if there is enough gas. Germany would like to have its gas storage tanks largely filled by November. We are currently on course for this. Switzerland also benefits from full warehouses, because then a shortage on the electricity market can be avoided.