In recent years, wholesale energy prices have shown unprecedented volatility across all commodities and markets. Significant levels of wholesale price volatility have now become established as a key industry dynamic players across the value chain are having to build into their forward planning.

• Understanding of the key factors driving prices over the coming five years.
• Insight into the relative importance and magnitude of individual factors impacting the main European wholesale power markets.
• Understanding of how changing market fundamentals can impact future wholesale price dynamics.

European wholesale power prices will continue to be driven by a similar set of fundamentals, though in widely differing permutations.

Various pieces of legislation have the potential to have an impact on power prices over the forecast period.

Levels of power self sufficiency are generally high across Europe.

• Understand future price dynamics and movements.
• Gain insight into the possible impact of individual price factors on the wholesale markets in Europe.
• Understand the relative importance of market fundamentals in the coming years.

TABLE OF CONTENTS

OVERVIEW
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Introduction
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This brief highlights the key factors that will steer European wholesale electricity prices in the coming five years. It also contains price scenario forecasts for the main European wholesale electricity markets.
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Key reasons to read this report
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Wholesale power markets have been bullish for a sustained period
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The upward price pressure seen recently in prompt power prices has also been seen at the back end of the forward curve
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Dutch power markets have shown consistent upward movements over the past few years
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German power prices have been particularly bullish since 2007
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French power prices have shown sharp upward movements of late
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After a decline in 2007, UK power prices are now at record highs
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The Belgian market has been tracking other European wholesale markets upwards
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A number of core factors will continue to influence wholesale power markets
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Levels of power self sufficiency are generally high across Europe
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Capacity margins remain tight in a number of markets
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Seasonal weather variations share an important relationship with wholesale energy prices
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Europe's power markets remain at widely differing stages of competitive development
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Various pieces of legislation have the potential to have an impact on power prices over the forecast period
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Datamonitor's price scenarios model examines potential developments in wholesale prices over a five year forecast period
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Datamonitor has developed a series of wholesale price scenarios using its European Wholesale Energy Price Scenarios Model
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Under the High Price Scenario a lack of new generation capacity drives prices higher
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The High Price Scenario sees power prices rising due to extreme climatic conditions and a maintained lack of fragmentation
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Under the Business As Usual Price Scenario wider capacity margins help curtail price pressures
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Under the Business As Usual Price Scenario new market entrants begin to gain ground against the former incumbents
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Under the Base Case Price Scenario price pressure remain low as a result of pro-nuclear energy policy and plant availability
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Under the Base Case Price Scenario mild temperatures and lower generation market fragmentation help constrain price pressures
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Appendix
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List of Figures
 
Figure 1: Prompt power prices have been on an upward trajectory in all of Europe's established wholesale power markets
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Figure 2: The upward price pressure seen recently in prompt power prices has also been seen at the back end of the forward curve
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Figure 3: Dutch power markets have shown consistent upward movements over the past few years
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Figure 4: German power prices have been particularly bullish since 2007
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Figure 5: French power prices have shown sharp upward movements of late
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Figure 6: After a decline in 2007, UK power prices are now at record highs
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Figure 7: The Belgian market has been tracking other European wholesale markets upwards
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Figure 8: Levels of power self sufficiency are generally high across Europe
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Figure 9: Capacity margins remain tight in a number of markets
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Figure 10: Seasonal weather variations share an important relationship with wholesale energy prices
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Figure 11: Competitive Intensity based on Datamonitor's MCI
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Figure 12: Datamonitor's "European Wholesale Energy Price Scenarios Model" uses core market drivers to develop price scenarios
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