In Southeast Europe, rising European gas prices are adding pressure to electricity markets as winter approaches and gas storage remains relatively limited. TTF futures climbed in Week 42, raising the implied cost of operating gas-fired power plants across the region.
Courtesy of Virtu.Energy
TTF prices and European storage levels
European gas benchmarks continued their rally in Week 42. TTF futures averaged €86.54/MWh, an increase of 11.6% from the previous week, and ended Friday at €87.55/MWh.
The benchmark stayed above €84/MWh throughout the week. At the close, the one-month forward contract was trading at about €88.40/MWh.
European gas inventories were at relatively low seasonal levels. Storage is expected to enter November at around 75–78%, approximately 10 percentage points below the five-year average.
Those levels do not necessarily point to a physical supply shortage, but they leave Europe with a smaller operational buffer. This makes the market more sensitive to disruptions in pipeline or LNG supply.
Europe remains reliant on both pipeline imports and LNG. Competition with Asian buyers can therefore pass through quickly to European hub prices.
Gas costs and regional power generation
For electricity markets, higher gas prices raise the marginal cost of combined-cycle gas plants. This can push wholesale power prices higher beyond countries that rely directly on gas-fired generation.
The link is particularly significant in Southeast Europe, where gas plants often provide flexibility as wind, solar and hydro output changes. Week 42 electricity data showed that the relationship between gas and power generation is not uniform across the region.
Regional gas-fired electricity output fell 7.43%. Greece, however, increased gas generation by 26.56%, while Croatia recorded a strong rise in thermal production that came entirely from gas.
At high gas prices, some generators reduce output as they become less competitive. Others continue operating when local electricity prices, grid requirements or export opportunities make generation commercially viable.
For Southeast European electricity traders, TTF remains an important external indicator to monitor through winter. Gas prices sustained near €90/MWh could keep gas-fired marginal power expensive even when renewable generation is strong.
Dispatch, flexibility and investment implications
Higher gas costs increase the value of coal, hydro, nuclear and renewable generation with lower short-run marginal costs. Each alternative also carries constraints: greater coal dispatch increases carbon exposure, hydro availability depends on water conditions, and renewable output is weather-dependent.
Nuclear production is relatively inflexible and geographically concentrated. Gas therefore remains part of the region’s flexible insurance mechanism, even when that flexibility is expensive.
Battery storage becomes more valuable when it can displace gas generation during high-price peaks. Demand response also becomes more attractive to industrial consumers.
Long-term renewable power purchase agreements (PPAs) can shield buyers from fossil-fuel price volatility. Buyers still need solutions for hours when contracted renewable generation is unavailable.
Europe’s gas market and Southeast Europe’s power market are likely to remain closely linked during winter. The key risk is not only whether Europe has enough gas, but whether the cost of securing supplies becomes high enough to reshape generation dispatch and electricity prices across the Balkans.
Courtesy of Virtu.Energy