Prices of natural gas and electricity prices should fall significantly from unprecedented heights in April 2022, according to the latest assessment by the European Union Agency for the Cooperation of Energy Regulators (ACER).
ACER has submitted to the European Commission its preliminary assessment of Europe’s high energy prices and the current wholesale electricity market design.
The European Commission, in its October toolbox communication, tasked ACER with carrying out an assessment of the current wholesale electricity market design by April 2022.
Of note, electricity prices today ranged from EUR 200 to EUR 240 per MWh.
ACER’s assessment is based on forward markets
ACER has analyzed forward markets. It said they reflect market expectations on how energy prices would evolve.
According to the forward curves for the TTF in the Netherlands and JKM Nymex markets, which are benchmarks for European gas trading and Asian liquefied natural gas (LNG) trading, respectively, high gas prices are transitory and should fall significantly in April 2022, the report reads.
On the other hand, the forward curve for electricity traded on the German EEX market, which serves as a reference for European electricity markets, points to a drop in electricity prices also around April 2022.
Europe remains vulnerable to demand surges linked to weather patterns
ACER stressed the assessment is consistent with the market outlook published in its October note, albeit with forward prices continuously shifting as a function of market fundamentals.
The agency warned Europe remains vulnerable to demand surges linked to weather patterns, as a harsh or mild winter significantly impacts demand for gas.