(Bloomberg) -- German year-ahead power traded near the lowest in three months as renewable energy is flooding the market and industrial demand is slow to recover.
While the electrification of everything from transport to heavy industry will propel usage in the future, it’s still some years away, according to BNP Paribas SA. That’s weighing on longer-dated power contracts.
“We expect renewable growth to continue to outpace the demand recovery,” said James Huckstepp a strategist at BNP Paribas SA. “The whole electrification story, EVs, heat pumps, data centers, we believe it’s going to happen, but it’s not a 2024 or 2025 story. It’s really a 2026 story.”
Germany is Europe’s biggest renewable energy producer and the nation is churning out more green power than ever before. Solar generation is set to rise 34% this summer from a year ago and will increase further next year, according to BloombergNEF.
At the same time, the rebound in power demand after the energy crisis is slower than expected. BloombergNEF sees consumption increasing just 1% this summer across Germany, France and the UK.
After exceeding €100 in late May when geopolitical events drove up natural gas rates, the next-year contract has slumped more than 15% to about €87 per megawatt-hour on Thursday. The French equivalent was little changed at €73.70.
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