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MARKET COMMENTARY

November 2025

Even though it doesn't feel like it yet in this golden autumn, winter is just around the corner. This is always a dynamic time for the energy industry, as temperature and meteorology have a stronger influence on prices than usual. The weather determines not only short-term spot market prices but also long-term futures market prices via heating load, gas consumption and storage. This is because a cold winter has a direct impact on the coming seasons due to the gas storage situation.

 

If we think beyond next year, we become aware of our permanence on Earth. In order to mitigate climate damage, we must reduce emissions, which also directly affects energy prices via the CO2 price. The number of CO2 certificates issued depends on climate targets. The decision on EU reduction targets by the EU institutions in November is eagerly awaited. Should 80% or 90% or something in between be saved by 2040? The EU Council will meet on 4 November 2025, followed by the Parliament on 14 November 2025. As you can see, numerous factors overlap when it comes to pricing. Nevertheless, we will attempt to analyse and compare the last few winter periods in order to derive a price expectation for the coming months.

 

CO2

 

  • From winter 23 to winter 24, CO2 prices rose by only 2.5% – and that in an environment of rising gas prices. This price pressure could have pushed up CO2 prices via the fuel switch. However, lower demand for emission allowances had a dampening effect.

  • However, a supply shortage on the CO2 market with upward price potential is expected for 2026 – whether this will already have an impact this winter is questionable.

  • The headlines mentioned above regarding the EU climate targets are likely to have the greatest influence on CO2 price developments. Among other things, discussions are focusing on a possible extension of the permissible international credits beyond the 3% proposed to date from 2036 onwards, as well as the inclusion of carbon capture and storage (CCS) in the achievement of targets. However, a price increase is unlikely to be sustainable due to the stable fundamental situation. We will come to that now.

 

Gas

 

  • The price of gas remains a key driver of power prices and is significantly influenced by the temperature during the winter season. In Germany, around 3,400 GWh of gas is consumed per day at an outside temperature of 1.79 °C – 1.79 °C is the average December to February temperature for the years 2000 to 2024. If the temperature rises to 4 °C (as in winter 23/24), daily consumption falls to around 2,950 GWh/day. Winter 24/25, on the other hand, was cooler on average (2.2 °C) and recorded correspondingly higher gas consumption at 3,250 GWh/day.

  • In addition to temperature, gas storage levels at the beginning of winter and LNG availability also play a major role. The average gas price on THE in winter 23/24 was around 31 EUR/MWh, twelve months later it was already around 49 EUR/MWh. At the end of March 2025, European storage facilities were only around 34% full. Empty storage facilities lead to high demand.

  • It is not yet possible to make reliable temperature forecasts for winter 25/26, but scenarios can be derived. Analysts, including ourselves, expect storage levels to be between 20% and 55% at the end of winter 25/26, depending on the temperature curve. Clearly, a cold winter has a significant impact on price levels.

  • Nevertheless, one should not speculate on high gas prices: LNG supply has risen significantly and price competition with Asia remains moderate (for now). Currently, the very stable LNG supply has led to a slight decline in gas prices since the end of the summer. Fundamentally, the upside potential is limited.

Generation

 

  • French nuclear power generation is back within the normal range. This means that output is also expected to increase in winter. However, the age of the power plant fleet is a major concern: it is now almost 40 years old, and a problem at one of the power plants can quickly have a cascading effect.
  • While PV generation naturally declines, wind generates significantly more power in autumn: over 60 GW on average in December to February in recent years. Incidentally, the record was set in February 2022: 75.84 GW. Last month, in October, wind in Germany also generated 47 GW at times, pushing the spot price down to a weekly average of 57 EUR/MWh. Overall, however, October was in line with the annual average for spot power prices.
  • Looking ahead to winter, however, we must note that long-term wind forecasts are uncertain, which is why we can only point to the possibility of a lull with rising prices – a risk for the procurement side, an opportunity for generation plants.

 

Power price comparison in Europe

 

  • In comparison of the winters of 23/24 and 24/25, power prices were recently significantly higher on average. In addition to higher gas prices, this was also due to lower renewable energy generation: the share of renewable energy generation fell from 44% to 40% across the EU, and by as much as 9 percentage points in Germany.
  • In Romania, the supply of renewable energy fell by 12 percentage points and spot prices rose from 85.02 to 133.07 EUR/MWh (+57%!) over the six months.
  • Estonia is a counterexample: there, the share of renewable energy in the grid load rose from 21% to 32%. Prices also rose, but only by £5.84/MWh.
  • In Poland, generation remained constant and the price increased by 31%. However, Poland must be viewed separately due to the high share of coal in its power mix.

 

To summarise: the main factors influencing potentially high prices in winter 25/26 are cold temperatures, price pressure from Asia, unplanned nuclear power plant outages and weak renewable energy generation. For medium scenarios, in which none of these events occur in extreme form, we consider the current market prices to be balanced market intersections – both for generation and end consumption.

 

What does this mean? The markets are in equilibrium. There is generally downward pressure on prices, triggered by strong LNG supply and mild weather forecasts, which is why gas futures markets have been on a downward trend since the summer. In the power market, on the other hand, there are no clear signals, with fundamental and political-speculative factors balancing each other out. And even if there is a brief price increase as a result of the decision on the EU climate targets, we and other analysts do not expect this to be a sustainable trend. At present, therefore, the energy markets are not yet dominated by the typical winter dynamics... We will see next month whether this remains the case, when the temperature outlook for the beginning of 2026 becomes clearer and we know how much CO2 needs to be saved by 2040.

 

Yours, Felix Diwok

For the Inercomp Team