From Wet Weather to Price Risk: Exploring French Power Market Scenarios for Late Winter

Unusually wet weather across Southern Europe is beginning to reshape power market dynamics, with France increasingly caught between low-priced imports and domestic production. In this market commentary, StormGeo's Senior Analyst Bengt Longva examines how precipitation and temperature developments could influence French power prices through February and March - and why the most likely scenario points toward continued downward pressure. 

Since mid-January, actual precipitation in Spain has amounted to 5 TWh above normal, and the spot price has fallen from roughly the marginal cost of combined cycle gas turbine (CCGT) (close to 100 €/MWh) to currently 0-20 €/MWh in the next few days. Over the next 15 days, the precipitation forecast is 3 TWh above normal, and the hydrological situation is likely to remain very strong.

This has sent Spanish future prices down significantly over the last couple of weeks, and the Spanish price level will likely be very low for at least the next couple of months. Given this, Spain will export close to maximum to France during this period. Only days with a very strong balance will we see some reduction in exports to France.

In Germany, forwards are closely linked to the marginal cost of CCGT power generation, although the forward market price is expected to decrease over the period.  The price level in France is expected to be somewhere between the German and Spanish levels, and precipitation and temperature development will be very decisive for the outcome.

The following 15 days, France expects 6 TWh above normal precipitation (normal precipitation is 2.7 TWh over the next 15 days). If we take a look at the cluster analysis for France from our meteorologists 05.02.2025, we observe that the meteorologists regard the very wet scenario as very likely.

If precipitation delivers as forecast, combined with above-normal temperatures and strong wind power, our price forecasts are not very different from the market over the next couple of weeks. However, if the wet period continues beyond the 15 days and the hydrological situation strengthens by a further 3-5 TWh, the power balance will likely build so strongly that France will need to reduce imports from Spain significantly also through March, and French prices will move down close to the Spanish level.

If we only receive 2.5 TWh above normal precipitation in the next 15 days and the subsequent 15-days period is close to normal, we will likely see France in March close to 80 €/MWh instead of 65 €/MWh. According to our meteorologists, the most likely scenario is the very wet one, leading to expectations close to the prices in the futures market.

About the Author
Bengt Longva is a Senior Analyst responsible for short-term power market analysis for Continental Europe. He also contributes to medium- and long-term market outlooks and brings broad experience across Nordic power markets, emissions, and coal market analysis.