The past month was marked by the stabilization of international trade relations, with the result that the fundamentally analyzed upward trends in energy prices once again overshadowed political events. In addition to market observation, several events had implications for the energy industry and sent unambiguous messages to energy policymakers.
The power outage in Spain at the end of April was more than just a technical incident – it exposed weaknesses in the European electricity market. When Portugal stopped importing electricity at short notice, the spot market price in Spain fell to -10 EUR/MWh. This is a sign of how sensitive the system is to imbalances. Germany is proving even more volatile: with 153 hours of negative prices up to May, in some cases down to -250 EUR/MWh, the electricity market is under pressure. One of the reasons for this is the subsidy system for renewable energies. Even when there is an oversupply, electricity continues to be fed into the grid because operators receive remuneration despite negative prices. The new Solar Peak Act is intended to counteract this: from 2025, the market premium will no longer apply in the event of negative prices, and new plants with feed-in tariffs will not receive any remuneration at all. Nevertheless, the problem will remain as long as many plants continue to receive fixed subsidies. A resilient energy market needs flexibility, storage and market-oriented incentives – especially with the growing share of renewable energies.
Renewables also have a decisive influence on CO2 emissions. At the beginning of April, the EU Commission published the emission figures for 2024 for all installations covered by the EU Emissions Trading System (EU ETS) – including European shipping for the first time. At around 56 million tonnes of CO₂, emissions from shipping are roughly on a par with those from intra-European air traffic. Overall, emissions from existing ETS sectors fell by just under 5% compared to the previous year – a decline that is more moderate than the record decline of over 15% in 2023, but still slightly above the EU’s target path for 2030. Compared to 2005, emissions have already been almost halved. However, to achieve the 62% reduction target by 2030, an annual reduction of around 4.4% is still necessary.
The sharpest decline was in the electricity and heating sector (-10%), driven by renewables. Generation from photovoltaics and wind rose by around 8% at EU level, with PV increasing by over 20%. In addition, a wet year and an increase in nuclear power of around 5% led to a significant reduction in fossil fuel electricity demand. However, the renewed increase in coal use from autumn 2024 prevented an even greater decline. In industry, emissions stabilized at the previous year’s level, with sector-specific differences: While cement, glass and ceramics declined by around 5%, emissions from the chemical industry rose again by just under 5%, but remained well below pre-crisis levels. Air traffic increased again by 15% and is approaching pre-coronavirus levels.
No further reductions in emissions are expected for 2025. Despite further expansion of photovoltaics, wind and hydro power are weakening, with the result that emissions in the electricity sector are currently around 7% above the previous year’s level. Industry is recovering slightly, which also argues against further declines. On the supply side of the CO₂ market, the REPowerEU programme is ensuring higher certificate volumes in the short term, but these will fall by up to 27% from 2027 onwards. This shortage is driving CO₂ prices up significantly: analysts expect values of around 90 to over 120 EUR per tonne for 2027. Decarbonization remains a challenge that depends primarily on the expansion of renewable energies, storage and a flexible energy system.
Before we turn to market developments, two important gas market announcements should be noted: The EU Commission is planning to ban Russian gas imports. The aim is to completely phase out Russian gas, which still accounted for 19% of EU imports in 2024. At the same time, there have been reports of talks between the US and Russia to examine a return of Russian gas supplies via US investors – a contradictory signal to the EU strategy. The EU Parliament also decided on more flexible gas storage rules: the filling target is to be reduced from 90% to 83%. Negotiations with the Council began on 13 May.
Gas storage facilities also have a huge impact on energy prices. After European gas storage facilities continued to be filled rapidly in May – with a storage rate of almost 4 TWh per day – and the fill level now stands at 48%, the electricity market also continues to be influenced by high availability. The downward trend in spot prices continued in May. In Germany and Austria, the monthly average of around 70 EUR/MWh was roughly half of the previous high for the year in February. Strong feed-in from wind and solar power pushed prices down over long periods. By the middle of the month, wind power production had reached 106% of the norm, with peaks of up to 170%. At the same time, photovoltaics reported new all-time highs on 13 May: 47.82 GW in one hour and 425.28 GWh per day. The last week of May was the second cheapest of the year so far: with solar generation at almost the norm of 14.1 GW, wind yield rose to an average of 16.5 GW.
Several days stood out with particularly extreme price movements. On 11 May, spot prices in Germany, Austria and France were consistently below zero during the day. In Poland – the most expensive market area at 62.60 EUR/MWh – seven hours were negative. In Germany, hour 14 was at -250.3 EUR/MWh, and in Belgium it was even at -462.33 EUR/MWh. The reasons for this were a strong combination of wind, solar and run-of-river power, coupled with weak demand. Similar effects were seen on the Friday after Ascension Day (30 May). Models predicted prices below -200 EUR/MWh for the midday hours. A load of only 55 GW was expected, with simultaneous generation of 43 GW from wind and 40 GW from solar – a surplus of 28 GW that is almost impossible to balance. Although around 2 GW of large-scale battery storage and 10 GW of pumped storage have now been installed in Germany, their capacity is not sufficient to cushion such feed-in peaks.
There was also a lot of movement on the futures market in May. First, electricity and gas prices consolidated upwards from their lows in view of the easing of trade conflicts. Then they fell again. Among other things, the rise was triggered by planned maintenance work in Norway, which temporarily reduced gas flows by 40%. Delays in the resumption of deliveries and the announcement of a US tariff pause also influenced prices. Only after the maintenance work was completed did Norwegian flows rise again. At the same time, consumption volumes declined due to lower temperatures, which allowed for more storage. Electricity prices followed these developments, also influenced by the trade talks between the US and China. There were also fundamental effects, including uncertainties in hydropower production. Although snowmelt in the Alpine region is now in full swing and is having a slight dampening effect on prices, water availability is still well below the long-term average. A premature end to the short-term melt, as feared in April, is not currently expected – a factor that is causing risk premiums on the futures market to fall.
In the short term, the outlook for the spot market remains subdued: high weather-dependent generation is meeting weak demand and limited flexibility. The futures market remains volatile – driven by geopolitical influences, storage requirements and weather-related uncertainties. The economic situation also remains fragile: although German GDP grew by 0.4% in the first quarter, leading institutes have already lowered their annual forecast to a maximum of 0.2%. Figures similar to last year are expected for the EU as a whole. This means that the direction of prices remains open – even if there is little to suggest a sustained recovery in the short term.
The past month was marked by the stabilization of international trade relations, with the result that the fundamentally analyzed upward trends in energy prices once again overshadowed political events. In addition to market observation, several events had implications for the energy industry and sent unambiguous messages to energy policymakers.
The power outage in Spain at the end of April was more than just a technical incident – it exposed weaknesses in the European electricity market. When Portugal stopped importing electricity at short notice, the spot market price in Spain fell to -10 EUR/MWh. This is a sign of how sensitive the system is to imbalances. Germany is proving even more volatile: with 153 hours of negative prices up to May, in some cases down to -250 EUR/MWh, the electricity market is under pressure. One of the reasons for this is the subsidy system for renewable energies. Even when there is an oversupply, electricity continues to be fed into the grid because operators receive remuneration despite negative prices. The new Solar Peak Act is intended to counteract this: from 2025, the market premium will no longer apply in the event of negative prices, and new plants with feed-in tariffs will not receive any remuneration at all. Nevertheless, the problem will remain as long as many plants continue to receive fixed subsidies. A resilient energy market needs flexibility, storage and market-oriented incentives – especially with the growing share of renewable energies.
Renewables also have a decisive influence on CO2 emissions. At the beginning of April, the EU Commission published the emission figures for 2024 for all installations covered by the EU Emissions Trading System (EU ETS) – including European shipping for the first time. At around 56 million tonnes of CO₂, emissions from shipping are roughly on a par with those from intra-European air traffic. Overall, emissions from existing ETS sectors fell by just under 5% compared to the previous year – a decline that is more moderate than the record decline of over 15% in 2023, but still slightly above the EU’s target path for 2030. Compared to 2005, emissions have already been almost halved. However, to achieve the 62% reduction target by 2030, an annual reduction of around 4.4% is still necessary.
The sharpest decline was in the electricity and heating sector (-10%), driven by renewables. Generation from photovoltaics and wind rose by around 8% at EU level, with PV increasing by over 20%. In addition, a wet year and an increase in nuclear power of around 5% led to a significant reduction in fossil fuel electricity demand. However, the renewed increase in coal use from autumn 2024 prevented an even greater decline. In industry, emissions stabilized at the previous year’s level, with sector-specific differences: While cement, glass and ceramics declined by around 5%, emissions from the chemical industry rose again by just under 5%, but remained well below pre-crisis levels. Air traffic increased again by 15% and is approaching pre-coronavirus levels.
No further reductions in emissions are expected for 2025. Despite further expansion of photovoltaics, wind and hydro power are weakening, with the result that emissions in the electricity sector are currently around 7% above the previous year’s level. Industry is recovering slightly, which also argues against further declines. On the supply side of the CO₂ market, the REPowerEU programme is ensuring higher certificate volumes in the short term, but these will fall by up to 27% from 2027 onwards. This shortage is driving CO₂ prices up significantly: analysts expect values of around 90 to over 120 EUR per tonne for 2027. Decarbonization remains a challenge that depends primarily on the expansion of renewable energies, storage and a flexible energy system.
Before we turn to market developments, two important gas market announcements should be noted: The EU Commission is planning to ban Russian gas imports. The aim is to completely phase out Russian gas, which still accounted for 19% of EU imports in 2024. At the same time, there have been reports of talks between the US and Russia to examine a return of Russian gas supplies via US investors – a contradictory signal to the EU strategy. The EU Parliament also decided on more flexible gas storage rules: the filling target is to be reduced from 90% to 83%. Negotiations with the Council began on 13 May.
Gas storage facilities also have a huge impact on energy prices. After European gas storage facilities continued to be filled rapidly in May – with a storage rate of almost 4 TWh per day – and the fill level now stands at 48%, the electricity market also continues to be influenced by high availability. The downward trend in spot prices continued in May. In Germany and Austria, the monthly average of around 70 EUR/MWh was roughly half of the previous high for the year in February. Strong feed-in from wind and solar power pushed prices down over long periods. By the middle of the month, wind power production had reached 106% of the norm, with peaks of up to 170%. At the same time, photovoltaics reported new all-time highs on 13 May: 47.82 GW in one hour and 425.28 GWh per day. The last week of May was the second cheapest of the year so far: with solar generation at almost the norm of 14.1 GW, wind yield rose to an average of 16.5 GW.
Several days stood out with particularly extreme price movements. On 11 May, spot prices in Germany, Austria and France were consistently below zero during the day. In Poland – the most expensive market area at 62.60 EUR/MWh – seven hours were negative. In Germany, hour 14 was at -250.3 EUR/MWh, and in Belgium it was even at -462.33 EUR/MWh. The reasons for this were a strong combination of wind, solar and run-of-river power, coupled with weak demand. Similar effects were seen on the Friday after Ascension Day (30 May). Models predicted prices below -200 EUR/MWh for the midday hours. A load of only 55 GW was expected, with simultaneous generation of 43 GW from wind and 40 GW from solar – a surplus of 28 GW that is almost impossible to balance. Although around 2 GW of large-scale battery storage and 10 GW of pumped storage have now been installed in Germany, their capacity is not sufficient to cushion such feed-in peaks.
There was also a lot of movement on the futures market in May. First, electricity and gas prices consolidated upwards from their lows in view of the easing of trade conflicts. Then they fell again. Among other things, the rise was triggered by planned maintenance work in Norway, which temporarily reduced gas flows by 40%. Delays in the resumption of deliveries and the announcement of a US tariff pause also influenced prices. Only after the maintenance work was completed did Norwegian flows rise again. At the same time, consumption volumes declined due to lower temperatures, which allowed for more storage. Electricity prices followed these developments, also influenced by the trade talks between the US and China. There were also fundamental effects, including uncertainties in hydropower production. Although snowmelt in the Alpine region is now in full swing and is having a slight dampening effect on prices, water availability is still well below the long-term average. A premature end to the short-term melt, as feared in April, is not currently expected – a factor that is causing risk premiums on the futures market to fall.
In the short term, the outlook for the spot market remains subdued: high weather-dependent generation is meeting weak demand and limited flexibility. The futures market remains volatile – driven by geopolitical influences, storage requirements and weather-related uncertainties. The economic situation also remains fragile: although German GDP grew by 0.4% in the first quarter, leading institutes have already lowered their annual forecast to a maximum of 0.2%. Figures similar to last year are expected for the EU as a whole. This means that the direction of prices remains open – even if there is little to suggest a sustained recovery in the short term.
Good luck with your energy decisions!
Yours, Felix Diwok
For the Inercomp team