Electricity prices are experiencing some positive momentum within the downward trend we have been seeing since October last year. This is mainly due to lower temperatures, which near the long-term average next week. In addition, the stronger gas price is also adding upward pressure on electricity prices. The rising gas price is mainly due to increasing demand for LNG from Asia. The spread between JK LNG and TTF is leading tankers destined for the spot market to the Asian market more often. Due to the brisk start of the filling season, gas demand in Europe is low, limiting the price effect.
The EU ETS price is recovering slowly but steadily. Still, the upside potential seems limited in the short term. Indeed, from a policy perspective, not too much can be expected until the European elections (6-9 June). Signals regarding European industrial and power generation activities will remain the main drivers in the short term. In the longer term, the theory indicates that the price of emission allowances should start to rise. There are big differences between the (possibility of) CO2 reductions in the power sector and industry. It makes the future of the EU ETS price more recalcitrant than theory. The price for CCS could be a good indicator of future ETS prices if investments in industry sustainability lag behind.