European gas markets were characterised by a continued decline in gas prices in the second Quarter of 2023, as well as a further reduction in gas demand and a reinforced shift towards LNG imports, especially from the United States to replace Russian pipeline gas, according to the latest Commission Quarterly Gas Market Report published today. For electricity markets, too, the second quarter trend was a continuation of positive market fundamentals that supported a fall in wholesale electricity prices following the declining prices seen in Q1 2023. The net impact was that EU households benefitted from lower prices at the end of the period reflecting the results of continued gradual market normalisation in the second quarter of 2023.
Q2 2023 gas market report
According to the gas market report, EU gas consumption from April to June 2023 further declined (to 65 bcm) and remained below the five-year consumption range of 2017-2021. Total gas consumption decreased by 42% quarter-on-quarter (reflecting mainly the start of the summer season in gas trade), and by 8% year-on-year.
EU domestic gas production continued to decline. The EU produced 16% less gas (9.5 bcm) then in the previous quarter and 17% less compared to the same quarter in the previous year. The biggest producer remained the Netherlands (2.8 bcm).
EU gas storage filling rates at the end of the quarter were over 70% in all but three Member States and at record high levels compared to the previous year, indeed compared to the three previous years.
EU gas imports increased by 7.7% (to 76,4 bcm) quarter-on-quarter and decreased by 17.7% year-on-year, but this increase was more marked for LNG than for pipeline gas. Nonetheless, EU pipeline imports increased by 4.6% (to 43.2 bcm) quarter-on-quarter and declined by 29% year-on-year mainly driven by much lower Russian gas supplies.
Total EU LNG import increased by 10% (to 33.2 bcm) quarter-on-quarter and increased by 13% year-on-year. And the EU was the largest LNG importer in the world with 22% share in global LNG imports in the 2nd Quarter, ahead of China (18%) and Japan (15%). The EU's biggest LNG importer was France (7 bcm, 21.1%), followed by Spain (6.1 bcm, 18.5%), and the Netherlands (5.8 bcm, 17.6%). The United States remained the EU's biggest LNG supplier with a 45% share (17 bcm), followed by Russia (15%, 5.8 bcm) and Qatar (13%, 4.9 bcm). The share of total Russian gas (pipeline and LNG) in total EU gas imports declined to 14% in the quarter. Russia’s share in EU imports has reduced by three-quarters since the pre-war period.
European gas prices continued to decline. The quarterly average spot price (as measured by the Dutch Title Transfer Facility benchmark) was 35.2 €/MWh, representing a 34% decrease from the previous quarter (53.3 €/MWh), and a 64% decline year-on-year (98.2 €/MWh). During April and May, European prices were higher than Asian prices with a premium amounting to 4.60 €/MWh in April and to 0.32 €/MWh in May (monthly average). In June however, Asian prices rose above EU prices. The Dutch Title Transfer Facility (TTF) remained the most important gas hub in Europe attracting three-quarters of the trading volumes. Total traded volumes increased by 21% from the previous quarter and 40% year-on-year.
Average monthly gas retail price for household consumers fell to 11.08 Eurocents/kWh in June from 11.78 Eurocents/kWh in May and 11.47 Eurocents/kWh in April 2023. The quarterly average retail gas price of 11.44 Eurocents/kWh was still 64% higher than in the pre-war period (Q2 of 2021), but 15% less than in the previous quarter and 10% less than in the same quarter last year (Q2 2022).
Retail prices continued to diverge across Europe. Amongst the Member States where natural gas is an important part of the energy mix, the Netherlands displayed the highest quarterly average retail gas price (17.15 Eurocents/kWh), while Hungary displayed the lowest (2.71 Eurocents/kWh).
Q2 2023 electricity market report
The electricity market report underlines that the second quarter of 2023 saw further market improvement, at least for April and May, building on the fall in prices since the start of the year. The European Power Benchmark averaged 89 €/MWh in the second quarter of 2023– 53% lower than in the same period twelve months earlier. On a yearly basis, practically all Member States experienced a decline in prices in their wholesale electricity markets (ranging from -63% to -23%). The largest year-on-year price falls in Member States were registered in Finland (-63%), France (-59%) and Spain (-56%). The lowest quarterly average prices during Q2 2023 were recorded in Finland and Sweden, at 44 €/MWh and 54 €/MWh, respectively. Conversely, the highest prices during the quarter were recorded in Ireland and Malta (116 €/MWh), but still they were 36% and 54% lower than in the second quarter of the previous year.
EU electricity consumption in the second quarter of 2023 fell (-6%) compared with last year’s levels. The lowest monthly demand value of the quarter (June 2023) was even lower than June 2020 values (which is special year with low demand due to the impact of COVID restrictions).
At the same time, the share of electricity generated by renewables increased for the second consecutive quarter to 46% in Q2 2023 (from 41% in the second quarter of the previous year), while share of fossil fuel-fired electricity fell to 30% (from 33% in the second quarter of the previous year). In the second quarter of 2023, combined solar and wind generation increased output by 9% (+12 TWh). Moreover, solar generation surged by 18% (+11 TWh), hydropower recovered by 11% (+8 TWh), while onshore and offshore wind generation increased by 1% (+1 TWh) and 6% (+0.5 TWh), respectively.
Fossil fuel generation dropped by 21% (-46 TWh) in Q2 2023 relative to the same period in 2022. Coal-fired generation fell by 34% (-32 TWh), whereas less CO2-intensive gas generation dropped by 18% (-18 TWh). The fall in fossil fuel generation was supported by lower demand and sustained renewables generation. Nuclear generation registered the first signs of recovery in the second quarter of 2023, rising by 1% (+1 TWh) when compared with the quarter of the previous year.
The decrease in wholesale prices registered in the first quarter of 2023 continued from April to June, thereby alleviating pressure on household electricity retail prices across the EU. Retail electricity prices for household costumers in EU capital cities were down by 4% in the second quarter of 2023, compared with the same quarter in 2022. Moreover, retail prices in the second quarter of 2023 were 8% lower than in the previous quarter (Q1 2023).
The record number of hours with negative wholesale prices in Q2 2023 (1441 hours) was close to 850% higher than in Q2 2022. Most of the negative hourly prices occurred in May 2023, during periods of high solar and wind generation and low electricity demand.
Close to 552 000 new EVs were registered in the EU in the second quarter of 2023, an increase of 28% in comparison with same quarter in 2022. Demand for electrical vehicles (EVs) in the second quarter of 2023 was the second largest quarterly figure on record and translated into a 21% of market share.
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Details
- Publication date
- 7 December 2023
- Author
- Directorate-General for Energy