EU gas and electricity markets began to normalise at the end of 2022 following the volatility created by the energy crisis, according to the Commission’s latest quarterly reports on the gas and electricity markets, published today. In its analysis of the last quarter of 2022, the Commission notes that gas prices eased back from record levels last summer, but remained historically high. Gas price market indicators, such as spreads between spot prices and forward contracts and price premiums on European trading hubs, started to normalise as last year’s comprehensive set of EU initiatives to fight the energy crisis resulted in tangible improvements. In particular, the record high gas storage levels, significant reductions in European gas demand, robust imports of LNG and a mild winter helped Europe to diversify away from Russian gas import.
Q4 2022 gas market report
According to the gas market report wholesale and retail gas prices started to fall at the end of December, after the volatility and high prices seen in 2022, including earlier in the fourth quarter. There was a dip in the TTF spot price (to 30 €/MWh) in October, as a number of LNG cargoes could not be unloaded at north-west European hubs, owing to high storage fullness and gas grid congestion in the region. It rebounded in November, however, peaking close to 150 €/MWh in early December, before dropping to approx. 70 €/MWh by the end of the year. The downward trend has continued into 2023 and is expected to define the market in the foreseeable future. Retail gas prices also eased significantly in much of the EU. The share of the energy component in the price continued to increase and reached 69% in Q4, while it was 53% a year earlier, as EU countries still kept reduced taxes and levies. EU gas consumption in the quarter fell by 21% (-25 bcm) year-on-year, amounting to 95.4 bcm.
The report reiterates the different policy measures taken at the EU level in the course of 2022 and their role in helping to ease the impact of the crisis. For gas storage, for example, the legal requirement to raise filling rates saw faster and longer storage replenishment than ever before – with average filling for the quarter some 29% higher than in the same period in 2021 – and volumes peaking at a record level of 95.6% on 13 November (95.6%) - almost a month later than usual. Indeed, a number of further measures were agreed upon in the fourth Quarter - better coordination of gas purchases; developing reliable price benchmarks for increased price transparency; establishing a market correction mechanism to address episodes of excessively high prices; and facilitating the deployment of renewable energy through accelerated permitting. This framework of measures has been supportive of the efforts to diversify supply (including expanding regasification capacity for LNG), save energy and switch from gas-fuelled energy to renewables. All in all, the report concludes, these measures facilitated a tangible improvement of the market situation in the fourth quarter of 2022 (and on into 2023).
In terms of supplies, after the cut of Nord Stream supply that occurred in the third quarter, Russian pipeline gas imports stabilised at around 3 - 4 billion cubic metres (bcm) per month, down from 11-12 bcm per month in the last 3 months of 2021. Russian pipeline gas imports fell to approximately 15% of the total quarterly EU imports from just over two-fifths of supplies in the same quarter in 2021, i.e. more than 25 percentage points lower. The unprecedented rise in LNG import (+13 bcm, +70% year on year) and some additional pipeline imports (mainly from Norway and the UK) helped to replace Russian supplies to the EU. In Q4 2022, the United States was the largest LNG supplier to the EU, ensuring 13.2 bcm (36.9% of the total EU LNG imports), followed by Qatar (6 bcm, 16% of EU imports) and Russia (5.6 bcm, 15%). In global terms, the EU remained the biggest LNG importer in the world in the October-December period, ahead of Japan and China.
Q4 2022 electricity market report
The electricity market report underlines the extent to which a decrease in electricity consumption helped to alleviate wholesale electricity prices. The European Power Benchmark averaged 187 €/MWh in Q4 2022– some 4% lower than in the same period twelve months earlier. The highest prices during the quarter were recorded in Greece and Italy (246 and 245 €/MWh, respectively) and were 11% and 1% higher than in Q4 2021.
Despite price developments in the final quarter, wholesale electricity prices in European markets broke several record highs in the course of 2022, with an unprecedented peak in August. The Russian war in Ukraine affected energy markets resulting in substantial increases in prices, volatility and uncertainty in the energy supply. Record high gas prices, exceptionally low nuclear fleet availability and reduced hydro output due to drought, increased the pressure on the already tight market. In 2022, the European Power Benchmark averaged 230 €/MWh, 121% higher than in 2021. Italy had the highest baseload electricity prices (304 €/MWh on average) in 2022, followed by Malta (294 €/MWh), Greece (279 €/MWh) and France (275 €/MWh).
At the same time, the share of renewables increased to 39% in 2022 (from 38% in 2021), while share of fossil fuels rose to 38% (from 36% in 2021). In 2022, the combined solar and wind generation increased their output by 14% in 2022 (+76 TWh). Moreover, solar generation rose by 26% (+41 TWh), onshore wind increased by 10% (+33 TWh) and offshore wind climbed by 4% (+2 TWh). A new record of installed renewable capacity was reached in the EU in 2022, as 57 GW of solar and wind capacity were added to the system. However, subdued yearly hydro generation fell by 17% (-61 TWh) on a drought that affected Europe.
Coal-fired generation increased by 6% (+24 TWh), whereas less CO2-intensive gas generation rose slightly by less than 1% (+1 TWh). Rising gas prices made gas-fired power generation less economically favourable compared to coal-fired generation. Nuclear generation outages and delayed scheduled maintenance in France made nuclear output fall by 17% (-118 TWh) in 2022.
High wholesale electricity prices resulted in rising bills for households in 2022, impacting the industry as well. Government interventions in some EU countries alleviated the bill for consumers. The ease in wholesale prices registered in Q4 2022 reduced the pressure on retail prices.
Demand for electrical vehicles (EVs) in Q4 2022 reached an all-time quarterly record. More than 695,000 new EVs were registered in the EU in Q4 2022, an increase of 30% in comparison with the same quarter in 2021.
Documents
Related links
Details
- Publication date
- 17 May 2023
- Author
- Directorate-General for Energy