Seventy-two euros per megawatt hour. This the gas price in the last session of 2022 after a roller coaster year I've had huge impact on bills and consequently on the pockets of citizens. The price ended the year at its lowest since the beginning of February, wiping out everything that happened from February 24th onwards, i.e. from the day when the unfortunate Russian invasion of Ukraine. Also affecting the descent was the agreement on the price cap reached in Europe after months of controversy, quarrels and mutual accusations. An agreement that did not satisfy the Governments, but which was seen by the markets as a clear turnaround that helped to calm the price on the Amsterdam TFT platform.
2022 of gas
At the end of August 2021, natural gas traded in Amsterdam it was worth 27,28 euros. The price began its bullish trajectory two months later. The main reasons were the increase in demand seen after the end of the toughest period of the pandemic, expectations for a colder and longer than expected winter, but also Europe's ever-increasing dependence on Russian gas. All these causes, together, have meant that on the TTF platform in Amsterdam the price of gas opens 2022 at a price of around 86 euros per mwh.
Then the watershed date: the 24 February 2022 Ukraine is invaded by Russia and war returns to the heart of Europe. Within a few days the first peak arrives: the 27 February the price of gas on the Dutch stock exchange exceeds 190 euros per Mwh. Thus begins energy crisis, made up of sanctions by the European Union and blackmail by Russia, a race for supplies and to fill stocks, skyrocketing gas and electricity bills.
At the heart of it all is a huge problem that at first seemed to have no solution: before the war, Russia supplied 40-50% of the EU's natural gas imports. Italy, for its part, in 2021 imported further 40% of its gas from Russia (31% from Algeria, 10% from Azerbaijan, 9% from Qatar, 4% from Libya). Without the Russian gas, which has become a weapon of war, Europe risked an unprecedented energy shock. Since then, thanks to the enormous efforts made by individual countries, the dependence of the European Union (and Italy) has significantly reduced and almost all have managed to fill the stocks ensuring a warm winter for their citizens. In the meantime, talks about gas price caps began between Brussels and Strasbourg, with the Draghi government to lead the way for the countries that asked to impose a European ceiling on prices.
This is the context. But what happened in the meantime on the markets? Prices continued their upward trajectory reaching at the end of August a historical maximum of 345,7 euros per mWh following the announcement, at that "temporary" juncture, to close the taps of the NordStream gas pipeline for "maintenance".
The European agreement on the price cap and today's values in Amsterdam
From the peak at the end of August, thanks to the mild season and full stocks, the price of natural gas on the Amsterdam TTF platform began its slow but inexorable descent. On the political level, the agreement reached in Europe on 19 December last was decisive. At the beginning of the month, in fact, gas was still traveling at around 140 euros per mWh, but it was now clear that an agreement was in the air. Two weeks ago the announcement: the EU has decided to fix a cap on gas prices natural a 180 euros per megawatt hour starting February 15th. For the tool to be activated, gas prices must be above the ceiling for three days with a spread over the LNG price of €35 for three days. Second Bloomberg, if the price cap had already been introduced in 2022 it would have been triggered for more than 40 days in the months of August and September.
Today, in the last session of 2022, the February 2023 gas futures on the Amsterdam Stock Exchange point to a drop of almost 16% compared to yesterday's closing 72 euros per megawatt-hour, the lowest level since the beginning of February and even lower than the first session of January 2022.
Effects on bills
Qualche good news it also begins to arrive on facing bills. According to theArera, thanks to the drop in the wholesale prices of energy products and the implementation by the Regulatory Authority for Energy, Networks and the Environment of the interventions envisaged by the Budget law, in the first quarter of 2023 the prices of electricity bills will decrease by 19,5% compared to those of the previous quarter. The decrease will particularly concern utilities under the protection regime, but according to forecasts a "contagion effect" is also likely on bills for supplies on the free market.
“With the level of European gas storages standing at the end of the year above 80% of available capacity and forward prices indicating less tense conditions for the balance of gas supply and demand in the first quarter of 2023 than expected at the beginning of October 2022 and at the prices formed in December - explained the Arera - even the forward electricity prices have moved downwards. Already in the fourth quarter of 2022, based on preliminary data, the single national electricity price (PUN) was down by around 48% compared to the very high levels of the third quarter of 2022 (246 €/MWh against 472 €/MWh on a quarterly average). Translated in simple terms: given that the prices of electricity bills are linked to the price of gas, with the prices of the latter falling, costs for families also fall.
Although forecasts on electricity bills are positive, the overall budget however, it remains negative: in the year between 1 April 2022 and 31 March 2023, a typical family spent around 1.374 euros, 67% more compared to the equivalent 12 months of the previous year.
Another aspect must also be underlined: the reduction announced by the Arera, for the moment, concerns just the electricity bills, while to find out what will happen with those of gas it will be necessary to wait for January 3, the day in which the Authority will communicate the monthly variation for December consumption.
This article is almost a year old, but it's still relevant. In 2023 the performance of ttfof Amsterdam has stabilized at much lower levels than in 2022, but all the elements correctly illustrated in this article (the real ones responsible for the high unpredictability of the gas price) are unchanged. It was, and is, extremely difficult to predict. We just have to wait. Cordial greetings.