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(Bloomberg) — Hotter weather in Europe this summer risks driving up demand while causing output from hydropower and nuclear plants to fall, according to research firm Energy Aspects.
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Higher-than-usual temperatures across western Europe next month could add about 3 gigawatts of extra demand, it said, while generation from hydro and nuclear power is expected to take a hit of a similar dimension.
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The region relies on those and other fuel sources during summer to balance output from renewables, and is likely to draw on natural gas to make up for any shortfalls. Traders are closely watching how heat waves develop across Europe as they could impact how much gas is put into storage ahead of next winter.
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Longer-term forecasts show temperatures remaining above normal levels throughout July. That risks pushing gas generation up by more than 4 gigawatts and also bolstering coal and lignite activity in Germany, according to Energy Aspects.
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European power contracts for delivery in July have edged up as a result, with the research firm seeing further upside for prices. French contracts are the most sensitive to heat, due to the potential for reduced generation from nuclear as rivers get too hot to cool reactors, and as air conditioning needs rise.
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Electricite de France SA has already said that a heat wave that’s spreading across the country may force it to curb nuclear output later this month due to the rising temperature of the Rhone river.
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Healthy hydro stocks in Spain are likely to limit the impact of heat on local prices, while in Germany demand does not typically respond as much to higher temperatures.
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French power contracts for delivery in July have risen about 16% this week. The equivalent contract in Spain is up about 8%.
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