How did the energy market develop in 2024? And how did world events impact the energy prices? Read the 2024 market analysis from our experts below.
"We have been through another year with high volatility on the European energy markets, and even though price levels did not reach the levels of the previous few years, we still saw big fluctuations across the markets."
With the effects of the recent energy crisis still fresh in memory, gas remained by far the most decisive market in 2024, and the one topic that throughout the year caused continuous fluctuations across all related markets. The year marked new supply issues for Europe, growing geopolitical concerns and rising prices both on the spot and futures market.
Whereas the previous year had offered significant price falls on the European gas market, 2024 marked a different development. Following another mild winter, both day-ahead and the most traded futures contracts on the TTF hub, the most liquid in Europe, had dropped below 30 EUR/MWh. However, after a year of uncertainty and a somewhat colder start to the most recent heating season, prices had jumped to around 50 EUR/MWh at the end of 2024.
Due to the cheap start of the year, the average day-ahead price of 2024 was still 15 % lower than the year before. Fluctuations were somewhat smaller than what we saw in 2023 and of course particularly in 2022, but still noticeable, and focus once again centered on the situation with Russian gas supply to Europe.
Even despite the war between the two countries going on for more than two years, Russia and Ukraine had managed to uphold an agreement on Ukraine serving as gas transit country for Russian pipeline exports to Europe. However, the deal was set to expire at the end of 2024, and during the year, it was a dominant topic on the market, whether the countries would be able to work out an extension to the agreement, or if gas flows through the pipeline would cease. As the year drew to a close, it became clear that the agreement would not be extended, and this meant a significant reduction in pipeline supply to Europe, which was already suffering from the shortfalls experienced during the previous years.
The failure of the countries to continue the gas flows resulted in a sharp price climb on the gas market during the last weeks of 2024.
With pipeline flows from Russia now further reduced, the supply picture for Europe has become even more critical than it already was. The EU is working actively on improving the situation and in 2024, rumors about new potential gas deals continuously affected the market. One potential gas supplier could be the Caucasus state Azerbaijan, who with its vast gas resources has announced it is ready to ramp up supplies to Europe, but here by early 2025, an agreement has yet to be reached.
The situation is particularly critical in Germany, where the final phase-out of the country’s nuclear power sector in 2023 has had big consequences.
The shortfall of nuclear power, at a time where Germany is also dealing with ambitions to lower coal production while facing reduced gas supply, has increased the already high volatility.
German power prices rose along with gas through 2024, and even though we are still not anywhere near the highs of 2022, the Germans can feel the effects of the nuclear closures. This also has a major effect on the southern parts of the Nordic area, first and foremost Denmark, where power prices correspond to those in Germany the majority of all days and hours.
In the federal election February this year, energy was – as a natural consequence - among the hottest topics. The presumed new German Chancellor, Friedrich Merz of the CDU, had initially expressed interest in restarting the country’s nuclear sector, but had to shelve the plans after learning that the dismantling of the plants was already well underway. Instead, Merz has now pledged to build 50 new gas-fired power plants in Germany over the next years to ramp up the country’s security of supply. This is however – given the current circumstances – an uncertain path to follow for Germany at a time where Europe’s gas supply is as fragile as it is.
As thing stand, the EU will have to rely heavily on LNG imports in the coming years, a significantly more uncertain supply source than pipeline gas.
The geopolitical situation when it comes to the major LNG suppliers also remained very volatile in 2024, amid the ongoing war in the Middle East, the ship attacks in the Red Sea and the uncertainty about the EU’s relations with Donald Trump during his second stint as US President.
A lot of volatility is surrounding the European energy markets when it comes to Donald Trump’s decisions. Trump has announced he wants to end the war in Ukraine, but the uncertainty about how and when this will happen, and if it could potentially mean that some of the sanctions against the Russian energy exports are lifted, is still unknown. Another topic, where Trump will attract interest from the EU is his wish to increase US LNG exports. The EU is ready to import more gas, but needs to improve internal infrastructure, including building new terminals.
On the Nordic power market, we have been through a year where a lot of focus has been on the growing number of hours with extremely low prices and the price differences between the Nordic area and the continent.
The average system price of 2024 was 36.06 EUR/MWh, around 35 % lower than the previous year. This was first and foremost the result of an extremely cheap summer and start to the autumn, with a vast hydrological surplus and high reservoir levels. At the end of the year, the hydro balance had reached a solid surplus of 20 TWh, a noticeable change from the large deficit which characterized the first part of the year, where spot prices were significantly higher.
The second half of the year was noticeable in offering a very sharp price difference between Nordic and continental power prices.
These were driven by different fundamentals, and whereas the system price fell due to the strong hydrological situation in the Nordic area, power prices in Germany and other continental countries rose due to – from a consumer perspective – unfavorable weather conditions and rising gas prices. As a result, the EPAD’s in the Southern Nordic price areas, first and foremost Denmark, skyrocketed.
During autumn, Dunkelflaute became a household term in the vocabulary of the Nordic energy consumers.
The German word, which describes cloudy and calm high-pressure weather was representative for the weather several times during the last months of 2024, causing periods of extremely high spot prices.
The tendency with major price deviations from day to day became even more pronounced last year, where most of the Nordic region experienced the effect of the increasing role of renewables. Negative prices – an extremely rare scenario only a few years ago – have now become a much more normal event in the Nordic area, when the weather conditions favor it.
The last two years, the frequency of the event has increased dramatically across the entire Nordic region, with more than 200 negative hours of a negative system price each year, and rapidly rising numbers in the respective price areas as well. In a matter of only two years, extremely low or even negative prices have become a standard occurrence, due to the rapid increase of the role of wind and solar in the power mix. With prices also often rising sharply, it naturally increases the need for flexibility among both consumers and producers.
We continue to see changes to the Nordic balancing energy market. The Nordic aFRR capacity market has been in operation for a couple of years now. It contributes to enabling the TSOs to procure aFRR capacity in a more cost-effective manner, but so far, not all Nordic areas are included in the market. Western Denmark (DK1) is not yet a part. It is expected that DK1 is to join the Nordic market, although the timespan for this inclusion is still uncertain. It will not happen until the Nordic power system has converted from frequency-based balancing to ACE-based balancing.
In October last year, Denmark joined the common European aFRR energy activation market, also known as the PICASSO. PICASSO enables TSOs to activate aFRR across Europe, thereby increasing flexibility in the European aFRR balancing market.