Europe's main electricity markets posted lower prices during the first week of July after the sharp increases recorded the previous week as a result of the heatwave that affected much of the continent. According to AleaSoft Energy Forecasting's weekly analysis, the combination of lower electricity demand and a strong increase in wind generation eased pressure on power prices, although lower solar generation in several markets partially limited the decline.

Spain and Portugal recorded weekly price reductions of around 28%, while France posted the largest decline at 32%. The British market fell by 20%, and Germany, Belgium, the Netherlands and the Nordic market recorded decreases of between 21% and 24%. Italy registered the smallest decline, at 6.8%, but remained the most expensive electricity market in Europe, with a weekly average price of €134.85/MWh.

The Nordic market once again recorded the lowest weekly average price, at €52.91/MWh, while Spain and Portugal remained almost identical at €63.20/MWh and €63.21/MWh, respectively.

Wind generation drove lower power prices

The main factor behind the decline in electricity prices was the sharp increase in wind generation across all major European electricity markets.

Germany recorded the largest weekly increase, with wind output rising 156%, followed by Italy (122%), Spain (70%), Portugal (62%) and France (9.1%). Spain, Portugal and France also extended their upward trend for a second consecutive week.

On 2 July, Spain and Portugal reached their highest wind generation for a July day in recent years. Spain produced 252 GWh, its highest output for a July day in the last four years, while Portugal generated 66 GWh, its highest July daily production in the past five years.

According to AleaSoft Energy Forecasting, wind generation is expected to increase only in Germany during the second week of July, while France, Italy and the Iberian Peninsula are expected to record lower wind output, which could place upward pressure on electricity prices.

Portugal and Italy set new solar generation records

In photovoltaic generation, Portugal recorded the largest weekly increase, with production rising 12% compared with the previous week. Spain maintained broadly stable output, while Germany, France and Italy posted declines.

Germany recorded the largest drop, at 24%, followed by France (9.8%) and Italy (1.1%).

Despite these declines, several countries reached new solar generation records. Portugal recorded a new all-time high of 35 GWh on 30 June, while Italy reached a record 164 GWh on 4 July. Spain, meanwhile, registered its highest photovoltaic generation ever for a July day on 5 July, with 249 GWh.

AleaSoft forecasts higher solar generation in Germany and Italy during the second week of July, while Spain is expected to see lower photovoltaic output.

Lower temperatures reduced electricity demand

The decline in temperatures following the late-June heatwave also contributed to lower electricity demand across most European markets.

Belgium recorded the largest weekly demand decline, at 10%, followed by Great Britain (9.8%), France (8.5%), Italy (5.3%) and Germany (4.7%). Spain recorded only a marginal decline of 0.3%.

Portugal was the only exception, as persistently high temperatures drove electricity demand up by 7%, marking the fourth consecutive week of growth.

For the second week of July, AleaSoft expects electricity demand to increase in Spain, France, Belgium and Great Britain, while demand is forecast to decline in Portugal, Germany and Italy.

Electricity prices are expected to rise again

According to AleaSoft Energy Forecasting, electricity prices are expected to increase in most European markets during the second week of July as demand rises and wind generation declines.

The consultancy also noted that fuel markets will continue to influence electricity prices. During the first week of July, TTF gas futures and CO? emission allowance futures increased, while Brent crude oil futures remained broadly stable.