Renewable energy output declines, European spot electricity prices surge

⑴ On Tuesday, European electricity spot prices surged significantly. The German day-ahead baseload contract rose to around 248 euros per megawatt hour, an increase of about 55%, while the equivalent French contract climbed to about 240 euros per megawatt hour, up approximately 44%. ⑵ The main driver was a contraction on the supply side: German wind power output is expected to decrease by about 10.1 gigawatts to 15.5 gigawatts, solar power supply will fall by about 2.4 gigawatts to 5.5 gigawatts, and French wind power supply will also drop by about 4.9 gigawatts to 3.1 gigawatts. ⑶ Meanwhile, demand is strengthening as well. Domestic demand in France is projected to increase by about 1.4 gigawatts to 51.3 gigawatts. Although the availability of French nuclear power has rebounded by 3 percentage points to 74% of total capacity, low flow in the Rhône River may lead to reduced output at the Saint-Alban nuclear plant from November 1. ⑷ Analysts point out that it is rare for low flow to affect reactors this late in the season. In 2026, France saw exceptionally low rainfall and suffered the most severe summer drought on record, which restricted both hydropower and nuclear output. ⑸ Weather forecasts indicate that, starting next Tuesday, regional temperatures will gradually fall below seasonal norms, with cooling signals intensifying after November 6, and anticipated heating demand is expected to further support electricity prices. ⑹ For forward contracts, next-year German baseload contracts edged up to around 157 euros per megawatt hour, the equivalent French contract settled the previous day at around 120 euros per megawatt hour, and the European carbon allowance benchmark contract slipped slightly to about 88 euros per ton.