Under scrutiny: Power price scenarios versus historical spot prices
As a customer, it is interesting to know how well our longterm power price simulations until 20260 perform compared to the historical development of spot prices.
Below, you will find a comparison of historical spot prices (annual averages) with the power price scenarios (annual values) published by Montel Analytics for Germany since 2013:
Fig 1: Comparison of Historical Spot Prices and Scenarios (Source: Montel Analytics):
To interpret this comparison accurately, consider the following points:
Calibration of Our Model: We use current commodity prices to calibrate our energy market model, Power2Sim. This calibration helps predict the next three years, and we compare these predictions with current futures market prices for electricity.
Volatility of Futures Market Prices: Futures market prices reflect volatile expectations of future spot prices and change over time. Therefore, a reference date value will inevitably deviate from actual price development due to short-term fluctuations in weather, commodity prices, demand, and production.
Historical Trends (2013-2016): During this period, our power price scenarios reflected the respective futures market prices, which were higher than the actual spot prices.
Multiple Scenarios after 2016: Since 2016, we have been publishing several consistent development scenarios as a what-if analysis to show a range of possible outcomes. These scenarios are based on current knowledge and should not be seen as forecasts, particularly for the liquid trading period (3 to 5 years into the future).
Performance Since 2017: Historical spot prices since 2017 have generally fallen within our modeled price corridor. Notably, even during the coronavirus pandemic, the low price scenarios were not undercut. The extreme price peaks due to the Russia-Ukraine conflict, which were unpredictable, significantly exceeded our scenario values but eventually returned within the predicted range.
Futures Market Adaptation: By the fourth quarter of 2021, the futures market had already anticipated the developments and risks, resulting in significantly higher power price scenario values for 2022.
Conclusion
The chart illustrates that historical prices typically fall within the range predicted by Montel Analytics’s power price scenarios. The extreme prices caused by the Russia-Ukraine conflict are an exception.
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