Market expects historic Nordic-German power spread in Q1

Nordic: Siltanews – News Desk
The futures market is currently pricing in the largest spread between Nordic and German power for more than 20 years in Q1 2025, indicating strong Nordic growth potential if precipitation volumes fall. The Nordic Q1 contract was last seen at EUR 54.60/MWh, compared to EUR 97.40/MWh for the equivalent German contract. If the price difference remains at this level in the spot market in Q1, it will be largest difference between the two markets for more than two decades, exchange data shows.

With the Nordic countries highly dependent on hydropower, precipitation levels are a crucial factor. “Water values ​​usually set the price and they are consistently low [at the moment] because there is a lot of water in the system, giving a strong power balance,” said Sigbjorn Seland, chief analyst at StormGeo. Conversely, German power prices were set by the marginal cost of gas-fired power plants, and price differences would therefore remain substantial as long as the Nordic market maintained a strong surplus of hydropower in reservoirs, said Seland.

The German premium typically indicates upside potential for Nordic power in terms of a scenario with tight supply, such as one requiring imports. Hydropower reservoir levels in some of the Nordic bidding zones are currently above 90% and the combined hydrological balance – which measures potential hydropower output in reservoirs, snow and soil. However, Tor Reier Lilleholt, chief analyst at Volue, said he believed the price gap between the markets would narrow closer to delivery.

“We see a small downside in the German market and a small upside in the Norwegian one,” he said, noting that EU gas inventory levels were last seen at around 95% of capacity, while Nordic prices could rise if the weather gets drier and cooler. The most recent forecasts predicted drier weather in Scandinavia, which may halve the current hydrological surplus over the next fortnight. This would push up prices in the Nordic region’s southern bidding zones, said Lilleholt.