French power prices relax, but remain elevated

Winter 2022 French peak power clean spark spreads have relaxed by 23% since end of August, supported by a reduction in risk premium and improvement in pan-European hydro balances. However, clean spark spreads are still significantly elevated compared to historical levels (see 3rd Jan 2022 levels) providing significant rent to French gas plants. The French market remains at the mercy of nuclear fleet availability levels, where strikes over pay and conditions have already delayed some nuclear restart dates from maintenance. An agreement on pay looks to have been reached easing risk of further strikes.

The high power prices imply significant demand response pricing in, along with likely continuing imports as UK peak power clean spark spreads price at a 54% and 69% discount for Winter 2022 and 2023 respectively to France.

As we pointed out in our winter gas market outlook, there is a significant challenge to be faced beyond this winter. Winter 2023 clean spark spread levels are also elevated given the likelihood of power & gas market strain into next year.