Low European power prices here to stay, says utility CEO
Low European electricity prices are here to stay, according to the new chief executive of Engie, the world’s largest non state-owned producer of electricity.
“I do not think that this is cyclical. I think that the price of electricity has no reason to rise. It will never be like it was before,” Isabelle Kocher told the Financial Times.
The bleak outlook from Ms Kocher, who was last week formally appointed at Engie’s annual general meeting, goes against predictions by some companies that a painful five-year trend of falling prices will soon reverse.
Jean Bernard Levy, chief executive of French utility EDF, last week said: “We are faced with a historical, record low in wholesale electricity prices . . . The price of a megawatt hour in western Europe has virtually divided by two.”
In Germany it has fallen from €60 per megawatt-hour in 2011 to around €25 this year. The French price has moved from around €56 per MWh to around €30. Some companies, including EDF, have predicted electricity prices in Europe will start to go up again after two or three years.
Ms Kocher told the FT that while fluctuations are possible, sluggish economic growth and the energy transition in Europe and around the world, which is putting a much greater focus on subsidised renewable energy, is set to keep prices “structurally” low for the foreseeable future.
The drop has had a deep effect on power providers. Paris-based Engie has written off nearly €24bn worth of assets over the past two years, as many of its gas power plants become uneconomical.
German operators of conventional power plants such as E.ON and RWE have faced an existential threat, with problems compounded by the government decision to close all nuclear power stations.
Last week RWE said its operating result for its conventional power generation dropped 20 per cent in the first quarter to €354m, mainly due to lower wholesale electricity prices.
Share prices have also collapsed: for EDF a fall of 63 per cent since the start of 2011, while the RWE share price has fallen 75 per cent and Engie 50 per cent over the same period.
Engie is making a push to reshape its business model, selling over the next three years €15bn worth of non-renewable energy assets, mostly in exploration and production, coal-fired power plants and US gas plants.
It will then invest €22bn in renewable energy, energy services such as heating and cooling networks, and decentralised energy technology, Ms Kocher said. It will also try to find regulated, not market based, energy contracts to protect itself from further price declines.