French power prices are closing the gap with Germany on concerns that a searing summer will boost cooling demand, while Europe’s largest economy benefits from milder conditions and easing gas costs.
French electricity for July has jumped about 10% over the past two days, while German front-month power only gained around 1%. That has narrowed the spread between contracts in the continent’s top power markets to €41 per megawatt-hour, near levels before the Iran war sent energy prices surging across the region.
The divergence reflects growing concern that hotter weather could strain France’s power system as homes and businesses crank up the air conditioning. The heat also increases the risk of disruptions to nuclear and hydroelectric generation.
“Fears of a hot summer and an ensuing risk of reduced nuclear availability is weighing on France,” said Karsten Sander Nielsen, a senior market analyst at Mind Energy.
France is forecast to see a return of hot temperatures as a high-pressure system replaces a stream of cooler Atlantic air that has affected the country since Monday, according to Météo-France. Temperatures in the south and west are expected to reach 30C by Friday, with some southern regions forecast to exceed 35C over the weekend.
The warm-up follows an early and deadly heatwave that gripped parts of Europe in late May and early June. The incoming weather pattern is expected to draw warm air north from the Iberian Peninsula, rapidly lifting temperatures across France.
Previous hot summers have disrupted French nuclear generation because river water used to cool reactors can exceed environmental temperature limits. Lower water availability can also reduce hydroelectric output.
German power, meanwhile, tracked declines in carbon and gas markets more closely. Gas prices have been relatively stable compared with the heightened volatility seen in March, after the upheaval triggered by US-Israeli attacks on Iran at the end of February wreaked havoc across energy markets.
“Gas, coal and carbon are all trading down this morning, which the German market is following more closely than France,” said William Peck, a senior European power analyst at Energy Aspects Ltd.
Traders are also looking at cooler and windier conditions in Germany next week.
On Tuesday, German month-ahead power prices fell about 2%, while those in France edged 0.6% lower.