The new year starts with a bang in Austria. The cancelled coalition negotiations mean that the Alpine republic is joining the ranks of the uncertainties in Europe’s political mood. Not only is the imminent inauguration of Donald Trump on 20 January 2025 causing noticeable uncertainty in the European economy (keywords: trade conflicts, tariff announcements), the protracted formation of a government in Austria is – for the moment – providing little planning certainty. Added to this is the upcoming new election in Germany on 23 February 2025. Even more than last year, this year will be a signpost for the framework conditions of the energy industry in the coming years.
The fact is: the dust has by no means settled after the super election year of 2024, but the overall economic outlook appears positive. After two years of recession, the Austrian economy could grow by 0.8% according to current forecasts by economic institutes. However, there is huge volatility here, as much depends on the plans of a new government. The disputes of the now collapsed traffic light government in Germany could also spread to Austria: Debt brake dogma or investment expansion? Inflation could also return to calmer waters in 2025 at just over 2%.
In Germany, there was record participation in tenders for wind power plants. The German regulator (BNetzA) has published the awards for the tender for onshore wind turbines as of 1 November 2024. The number of bids submitted more than doubled the previous record from the previous tender. Almost as many bids were submitted as in all tender rounds from 2023 combined. With an advertised volume of 4,094 megawatts, 528 bids were submitted with a bid volume of 6,083 megawatts. The tender was therefore almost 1.5 times oversubscribed. A total of 348 bids totalling 4,098 megawatts were awarded.
In addition to the expansion of renewables, the reduction of CO2 emissions is also being promoted. The EU Commission set the quantity of certificates at more than one billion certificates in 2027. The EU Commission has adopted a decision to determine the EU-wide quantity of allowances to be issued in 2027 as part of the expansion of the EU Emissions Trading Scheme to include the buildings and transport sectors. Accordingly, 1,036,288,784 certificates are to be issued in that year. The calculation of the cap for 2027 is based on the average CO2 emissions from fuel combustion in the ETS II sectors from 2016 to 2018. This average is to be reduced as follows by 2027: Firstly until 2024 through a linear reduction path based on all emissions under the Effort Sharing Regulation, and secondly for the years 2025 to 2027 through an annual linear reduction factor of 5.1 per cent. The ETS II cap for 2028 is to be determined at a later date on the basis of the average CO2 emissions of all ETS II companies between 2024 and 2026. What is positive about this? In our view, two things: Firstly, the emissions that were previously not included in ETS I are now taken into account. In addition to road transport, heating buildings is particularly relevant in terms of the energy industry, which means that emission certificates will also be issued and traded for heating with gas. And secondly, this in turn should result in more planning certainty. Incidentally, the EU ETS 2 will start reporting on 1 January 2025 and will not become active until 2027.
A small but important adjustment in the electricity spot market granularity is extremely interesting. The prices in Single Day Ahead Coupling (SDAC) will be transformed from hourly prices to quarter-hourly prices in 2025. Originally planned for the end of Q1, the new go-live date for the 15-minute product time slices in the day-ahead auction is 12 June 2025. What sounds like a rudimentary step is long overdue and has always been part of the balancing energy prices. What does this improve? First and foremost, it is the adjustment of the trading products to the metering intervals. It gives suppliers and consumers the opportunity to plan better and thus avoid balancing energy. The hourly ramps of consumption in the morning and evening will also be better covered. Prices in intraday trading are already set every quarter of an hour in continuous trading and in the auctions that take place three times a day. Now also in the SDAC. In future, the average spot market price for a day will consist of 96 quarters of an hour. These prices will then also be used for clearing futures contracts.
With the accelerated expansion, energy industry networking with neighbouring Eastern European countries is becoming an increasingly important topic. In Bulgaria, around 9 GWh of electricity storage capacity will be built in the coming years with EU support. After 2.0 GW of renewables growth in 2023, this will be slightly less in 2024 at 1.5 GW. However, Bulgaria plans to expand 4.8 GW of renewable capacity by 2030. Romania is planning to expand energy storage and announced a new subsidy programme for electricity storage in Q4 2024. Funding in the form of auctions is planned, which will enable investors to guarantee the economic viability of energy storage systems through fixed prices and thus expand 3.5 GW of new capacity. Serbia would like to expand new border capacities in the direction of Hungary. A corresponding tender for 600 MW (60% of the current capacity) has just been published by the Serbian TSO EMS. The aim of the project is to reduce overloads and increase the flexibility of both national grids.
Finally, let’s take a look at the electricity spot prices at Christmas. The average spot price for electricity in the German bidding zone during the Christmas week was EUR 103/MWh. By comparison, the spot price for the whole of December 2024 averaged EUR 108/MWh and EUR 79/MWh for the whole of 2024. This figure for the last week of the year is particularly high because electricity consumption reaches its annual minimum during the Christmas period. At 47 GW, the average grid load in Germany was around 20% below average. At the same time, there was still a lull: the German onshore and offshore wind power fleet only generated 11 GW during the Christmas week. However, due to the lower grid load, there were no price peaks and no media coverage compared to the remarkable spot prices in November. In contrast, the gas spot market has seen a continuous upward trend since 17 December. In the last week of the year, THE spot price rose by a further 8 %. However, the extent of the latest price increase is reversing with the mild temperatures that will accompany us until mid-January. The average spot price for electricity in the first week of 2025 was only EUR 65/MWh and gas prices are already falling. The recent high gas prices almost make us forget that the gas storage level is still at a high 70 %! The supply situation for Europe is therefore still good.
Good luck with your energy decisions and have a good start to the new year!
The new year starts with a bang in Austria. The cancelled coalition negotiations mean that the Alpine republic is joining the ranks of the uncertainties in Europe’s political mood. Not only is the imminent inauguration of Donald Trump on 20 January 2025 causing noticeable uncertainty in the European economy (keywords: trade conflicts, tariff announcements), the protracted formation of a government in Austria is – for the moment – providing little planning certainty. Added to this is the upcoming new election in Germany on 23 February 2025. Even more than last year, this year will be a signpost for the framework conditions of the energy industry in the coming years.
The fact is: the dust has by no means settled after the super election year of 2024, but the overall economic outlook appears positive. After two years of recession, the Austrian economy could grow by 0.8% according to current forecasts by economic institutes. However, there is huge volatility here, as much depends on the plans of a new government. The disputes of the now collapsed traffic light government in Germany could also spread to Austria: Debt brake dogma or investment expansion? Inflation could also return to calmer waters in 2025 at just over 2%.
In Germany, there was record participation in tenders for wind power plants. The German regulator (BNetzA) has published the awards for the tender for onshore wind turbines as of 1 November 2024. The number of bids submitted more than doubled the previous record from the previous tender. Almost as many bids were submitted as in all tender rounds from 2023 combined. With an advertised volume of 4,094 megawatts, 528 bids were submitted with a bid volume of 6,083 megawatts. The tender was therefore almost 1.5 times oversubscribed. A total of 348 bids totalling 4,098 megawatts were awarded.
In addition to the expansion of renewables, the reduction of CO2 emissions is also being promoted. The EU Commission set the quantity of certificates at more than one billion certificates in 2027. The EU Commission has adopted a decision to determine the EU-wide quantity of allowances to be issued in 2027 as part of the expansion of the EU Emissions Trading Scheme to include the buildings and transport sectors. Accordingly, 1,036,288,784 certificates are to be issued in that year. The calculation of the cap for 2027 is based on the average CO2 emissions from fuel combustion in the ETS II sectors from 2016 to 2018. This average is to be reduced as follows by 2027: Firstly until 2024 through a linear reduction path based on all emissions under the Effort Sharing Regulation, and secondly for the years 2025 to 2027 through an annual linear reduction factor of 5.1 per cent. The ETS II cap for 2028 is to be determined at a later date on the basis of the average CO2 emissions of all ETS II companies between 2024 and 2026. What is positive about this? In our view, two things: Firstly, the emissions that were previously not included in ETS I are now taken into account. In addition to road transport, heating buildings is particularly relevant in terms of the energy industry, which means that emission certificates will also be issued and traded for heating with gas. And secondly, this in turn should result in more planning certainty. Incidentally, the EU ETS 2 will start reporting on 1 January 2025 and will not become active until 2027.
A small but important adjustment in the electricity spot market granularity is extremely interesting. The prices in Single Day Ahead Coupling (SDAC) will be transformed from hourly prices to quarter-hourly prices in 2025. Originally planned for the end of Q1, the new go-live date for the 15-minute product time slices in the day-ahead auction is 12 June 2025. What sounds like a rudimentary step is long overdue and has always been part of the balancing energy prices. What does this improve? First and foremost, it is the adjustment of the trading products to the metering intervals. It gives suppliers and consumers the opportunity to plan better and thus avoid balancing energy. The hourly ramps of consumption in the morning and evening will also be better covered. Prices in intraday trading are already set every quarter of an hour in continuous trading and in the auctions that take place three times a day. Now also in the SDAC. In future, the average spot market price for a day will consist of 96 quarters of an hour. These prices will then also be used for clearing futures contracts.
With the accelerated expansion, energy industry networking with neighbouring Eastern European countries is becoming an increasingly important topic. In Bulgaria, around 9 GWh of electricity storage capacity will be built in the coming years with EU support. After 2.0 GW of renewables growth in 2023, this will be slightly less in 2024 at 1.5 GW. However, Bulgaria plans to expand 4.8 GW of renewable capacity by 2030. Romania is planning to expand energy storage and announced a new subsidy programme for electricity storage in Q4 2024. Funding in the form of auctions is planned, which will enable investors to guarantee the economic viability of energy storage systems through fixed prices and thus expand 3.5 GW of new capacity. Serbia would like to expand new border capacities in the direction of Hungary. A corresponding tender for 600 MW (60% of the current capacity) has just been published by the Serbian TSO EMS. The aim of the project is to reduce overloads and increase the flexibility of both national grids.
Finally, let’s take a look at the electricity spot prices at Christmas. The average spot price for electricity in the German bidding zone during the Christmas week was EUR 103/MWh. By comparison, the spot price for the whole of December 2024 averaged EUR 108/MWh and EUR 79/MWh for the whole of 2024. This figure for the last week of the year is particularly high because electricity consumption reaches its annual minimum during the Christmas period. At 47 GW, the average grid load in Germany was around 20% below average. At the same time, there was still a lull: the German onshore and offshore wind power fleet only generated 11 GW during the Christmas week. However, due to the lower grid load, there were no price peaks and no media coverage compared to the remarkable spot prices in November. In contrast, the gas spot market has seen a continuous upward trend since 17 December. In the last week of the year, THE spot price rose by a further 8 %. However, the extent of the latest price increase is reversing with the mild temperatures that will accompany us until mid-January. The average spot price for electricity in the first week of 2025 was only EUR 65/MWh and gas prices are already falling. The recent high gas prices almost make us forget that the gas storage level is still at a high 70 %! The supply situation for Europe is therefore still good.
Good luck with your energy decisions and have a good start to the new year!
Yours André Masannek, Marlene Aschauer and Felix Diwok
For the Inercomp team