Forecast cold weather and continuing geopolitical tensions could further deplete gas storage levels in Europe and increase power prices this winter. That is the standout highlight in the latest report on the European electricity market from energy data analyst Montel Analytics.
With gas storage levels currently around 10 percent below mandatory levels imposed by the EU, cold weather and increased heating demand could exert upward pressure on both gas and power prices in the final months of this year.
Lower-than-normal temperatures could intensify this pressure as Europe competes with Asia for Liquefied Natural Gas (LNG) supplies, while ongoing tensions in Ukraine could have the same effect as European countries draw on gas storage reserves to reduce their reliance on Russian gas.
Early indications are that Europe could be hit by a La Niña weather pattern this winter, which essentially means we could experience colder-than-normal conditions. If this materialises, the system could face tighter supply-demand margins, driving increased gas storage drawdowns and putting upward pressure on electricity prices. The weather will ultimately determine how stressed the system will be. Dunkelflaute periods of low wind and no solar generation could put additional stress on the system, especially if there are issues with hydro or nuclear generation, said Jean-Paul Harreman, Director at Montel Analytics.
The Montel report also examined key power generation trends across Europe in the third quarter of this year.
Solar and wind output of 109 TWh and 108.9 TWh, respectively, were record highs for the third quarter, while gas generation rose by 8 percent on Q3 2024, to total 93.6 TWh.
Power produced from coal/lignite dropped by 9 percent against the same period to a total of 59.8 TWh across the quarter.
Low rainfall is affecting hydro power
Meanwhile, low rainfall in June and July caused reservoir levels in Norway to be lower than usual, particularly in the NO2 price zone.
Nordic hydropower production and exports are likely to suffer in the final three months of the year unless an above-average amount of rain falls to help maintain reservoir levels.
Hydropower generation in much of the rest of Europe is also lower than usual due to falling rainfall levels and higher-than-normal temperatures experienced so far in 2025.
The Montel report shows that in the third quarter of this year, hydro power across Europe declined by 6 percent on Q3 2024, to fall to 97.1 TWh, the lowest level for three years, which could also place pressure on power prices.
The last three months of the year are also likely to be characterised by further periods of negative prices, the report said.
The Netherlands, Spain, and the SE2 price zone in Sweden have experienced more than 500 hours of below-zero prices so far this year, with Germany, France, and Belgium not far behind, with more than 450 hours each.
Negative price events have been a growing trend across Europe in recent years. Consensus is divided on whether this represents market dysfunction or simply an incentivising of flexibility via price signals. The cause is intermittent renewables, which can create a surplus of electricity on especially sunny or windy days, as well as a lack of storage and flexible demand. Although Q4 is likely to have fewer negative price hours simply by virtue of seasonal impacts, including lower solar generation and higher demand due to colder temperatures, the general growth in periods when prices drop below zero is likely to continue, concluded Jean-Paul Harreman.
