Spanish spot to deliver above expectations in August

The Spanish spot index is on track to deliver above expectations in the over-the-counter (OTC) market over August, based on the average spot index over 1-16 August and assessments and trades for weeks 34 and 35.

The Spanish spot index delivered at €90.29/MWh over 1-16 August, up from €72.31/MWh over the month of July. Based on the average spot index and the latest assessments and trades for weeks 34 and 35, the spot could deliver at an average of €89.76/MWh across the month, more than €9/MWh above the August contract's expiry.

Lower renewable output has supported the spot index. Renewable generation over 1-14 August fell on the month, with hydropower output declining by 150MW from 2.9GW in July. And wind power was down by around 400MW from 5.5GW last month, while solar output has remained flat on the month at 7.8GW.

But renewables output has risen on the year, with hydropower generation almost doubling to 2.8GW. Near-decade high hydropower reservoir levels this year have supported generation. Solar photovoltaic (PV) output has also risen by around 1.7GW on the year, and gas-fired generation has fallen to 3.7GW from 4.6GW last year. But wind output has fallen by 1.3GW on the year to 5GW.

Maximum temperatures in Madrid have remained at an average of 2.8ºC above the norm over 1-15 August, reaching a high of 40.4ºC. The typical drop in demand from July to August has been tempered by the hot weather, with demand falling by just 200MW compared with an average of almost 1GW over 2019-23. Temperature forecasts point to maximum temperatures remaining above long-term averages for the rest of August, but dropping to an average of 2.6ºC above norms and remaining below 37.8ºC.

And as temperatures decline wind output is expected to rise, with generation forecast to average around 5.6GW in the second half of the month, according to data from trade and analytics platform Kpler. Falling temperatures are likely to weigh on demand, with current expectations pointing to demand dropping to 26.3GW in week 34 from a forecast 26.5GW in week 33.

And wind output for the second half of the month is expected to average around 5.6GW, according to data from Kpler, while no nuclear unavailability is scheduled for the rest of the month. Increased wind output and falling temperatures could outweigh a decline in solar generation, with output expected to drop from 7.4GW on 15 August to 6.4GW by 21 August. And generation could continue its downward trend across the remainder of the month as daylight hours continue to shorten.

Spanish net imports from France have increased so far in August to 2GW from 1.4GW in July, and from 524MW over August 2023. French nuclear unavailability has been lower so far this summer, averaging 17.2GW during the first half of August compared with 29.2GW over the same period last year.

Spanish net exports to Portugal have increased on the year to 1.9GW from 1.6GW in August 2023, but they were below the 2.2GW in July. Despite the increase in net exports, the two spot indexes have cleared at parity every day in August aside from 7 August, when Portugal cleared at a €0.03/MWh premium.

Portuguese renewables output in the first half of August has fallen by around 1.1GW on the month and 1GW on the year. The decrease has largely been the result of lower wind output, which averaged 1.9GW over 1-15 August, compared with 4.5GW in July and 4GW in August 2023.

By Thess Mostoles

Evolution of renewable output and Spanish spot