Power Premium Shrinking as France Converges With Germany: Energy Markets

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The extra cost to buy French electricity compared with Germany’s is shrinking as the European Union moves toward a single power market for the continent.

French electricity for delivery next year traded at as little as 1.30 euros ($1.73) a megawatt-hour more than the equivalent German contract yesterday, the smallest difference since February, according to data compiled by Bloomberg based on broker prices. That compares with this year’s high of almost 4 euros on May 17 and an average of 2.50 euros during 2010. The spread traded today at 1.75 euros.

The falling premium shows how the system of so-called market coupling, which routes electricity to where prices are highest, is making Europe’s power market more competitive as the EU moves toward a unified system by 2015. Day-ahead power for France and Germany, the region’s biggest consumers, converged on Nov. 9, the day the nations were coupled for the first time.

“Germany will move closer to France as now there will only be one physical market,” said Dieter Hluchy, a trader at Stadtwerke Hannover AG, an energy supplier based in Hannover, Germany. “It’s now a European market.”

http://www.bloomberg.com/news/2010-11-25/power-premium-shrinking-as-france-converges-with-germany-energy-markets.html

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1. Very interesting. Nt