EU gas and electricity markets were marked by a fall in wholesale gas and electricity prices in the first quarter of 2023, after the all-time highs registered during 2022, according to the Commission’s latest quarterly reports on the gas and electricity markets, published today. In its analysis of the first quarter of 2023, the Commission notes the improved market fundamentals that supported the continued downward trend in gas prices, settling at levels at the end of March which were around 75% lower than in the previous quarter, but still high in historical terms. Gas price markets indicators, such as spreads between spot prices and forward contracts and price premiums on European trading hubs, started to narrow and displayed restored price convergences on the main EU gas hubs, as last year’s comprehensive set of EU initiatives to address the energy crisis resulted in tangible improvements. In particular, the record high gas storage levels, significant reductions of European gas demand, robust imports of LNG and a mild winter helped Europe to diversify away from Russian gas imports.
Q1 2023 gas market report
According to the gas market report, wholesale gas prices continued their downward trend from the all-time high of 320 €/MWh recorded on 26 August 2022. The quarterly average spot price for January to March was 53 €/MWh, representing a 44% decrease from the previous quarter’s average (95 €/MWh) and a 45% decrease year-on-year (97 €/MWh). This was also a 73% drop from the peak (198 €/MWh) in the third quarter of 2022. However, the average spot price was still 187% higher compared to the average in the first quarter of 2021. Spot prices ranged between 60-70 €/MWh in January, 50-60 €/MWh in February and 40-50 €/MWh in March 2023.
Average monthly gas retail prices for household consumers decreased steadily during the first quarter of 2023 from the historic high of 17.57 Eurocents/kWh in September 2022 to 13.27 Eurocents/kWh in March 2023, a 17% decrease. However, the average price level was still 15% higher than the average price in the first quarter of 2022, and 85% above historic levels in the first quarter of 2021.
In parallel with this price decline, EU gas consumption and imports dropped significantly. Gas consumption fell by 13% - year-on-year, well below the five-year average - even if there was a rebound of 19% after a decline (-21%) to a very low consumption in the previous quarter. Total gas imports decreased by 24% year-on-year and by 11% quarter-on-quarter. In the first quarter of 2023, average gas storage stood at 67.5%, in the upper band of the 5-year average and 93% higher than in the same period in the previous year.
The share of Russian pipeline gas in total EU gas imports during the quarter further decreased to 8%. Russia’s share of total gas imports in the EU (pipeline gas and LNG) dropped to 14% from 15% in the previous quarter and from 42% in the same period last year. Total EU pipeline imports from all exporter countries decreased by 9% (42.2 bcm) in the first quarter of 2023 and declined 32% year-on-year. Norway remained the largest pipeline gas exporter to the EU (with 53% of the total, 21.7 bcm), followed by North-Africa (18%, 7.3 bcm) and Russia (12%, 5 bcm).
LNG accounted for 42% of the EU gas imports during the first quarter 2023, a significant increase from the 33% a year earlier. The US remained the EU’s biggest LNG supplier with a 41.5% share, followed by Russia (19%) and Qatar (12%). The EU remained the number one LNG importer in the world with 31.2 bcm or 22% of global LNG import, followed by Japan and China.
Q1 2023 electricity market report
The electricity market report underlines that the first quarter of 2023 was marked by improved market fundamentals that supported a fall in wholesale electricity prices, after the highs of the third and fourth quarter of 2022. The European Power Benchmark averaged 122 €/MWh in the first 3 months of 2023– 40% lower than in the same period twelve months earlier. The highest prices during the quarter were recorded in Italy and Greece (158 and 157 €/MWh, respectively) and these were 37% and 34% lower than in the first quarter of the previous year. On a yearly basis, twenty-six Member States experienced a decline in prices in their wholesale electricity markets (ranging from -57% to -11%). The largest year-on-year price falls in Member States were registered in Spain and Portugal (-57%) and France and Croatia (-43%).
EU electricity consumption in the first quarter in 2023 fell 6% compared with last year’s levels. Demand levels for the first quarter of 2023 were also well below the 2017-2021 range, registering the lowest value in February 2023.
At the same time, the share of electricity generated by renewables increased to 41% in the first quarter of 2023 (up from 36% in the first quarter of the previous year), while the share of fossil fuels-fired electricity fell to 35% (down from 39%). Similarly, combined solar and wind generation increased their output by 5% (+8 TWh). Moreover, solar generation rose by 8% (+2 TWh), onshore wind increased by 6% (+6 TWh). Hydropower improved its output by 15% (+10 TWh) in the first quarter of 2023.
Coal-fired generation fell by 13% (-15 TWh) in the first quarter, whereas less CO2-intensive gas generation dropped by 19% (-24 TWh). Indeed, overall fossil fuel generation fell by 15% (-40 TWh) relative to the first quarter of 2022, supported by lower demand and sustained renewables generation. Despite improved availability of the nuclear fleet, nuclear output from January to March fell by 7% (-13 TWh).
The decrease in wholesale prices registered in the first quarter of 2023 alleviated pressure on household electricity retail prices across the EU. Retail electricity prices for households in EU capital cities were still up by 15% in the first quarter of 2023, compared with the same quarter in 2022. However, retail prices in the first quarter of 2023 were still 14% lower than in the previous quarter (Q4 2022).
More than 475,000 new electric vehicles were registered in the EU in the first quarter of 2023 - an increase of 34% in comparison with the same quarter in 2022. Demand for electric vehicles in the first quarter of 2023 was the fourth largest quarterly figure on record and translates into 19% of market share.
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Details
- Publication date
- 6 October 2023
- Author
- Directorate-General for Energy