Germany’s March Puzzle: Fuel Shock or Solar Shape?
Neat market stories are made to be questioned. A reader's digest.
The war shock hits oil and gas. Gas reprices European power. Power spreads widen. Flexibility becomes more valuable. It is a tidy sequence, and it is not hard to see why it has traction.
The war that began on 28 February has already become a major disruption to global energy trade, with oil and gas flows through the Strait of Hormuz badly affected and global LNG supply reduced by around 20%. Brent rose by over 60% in March, as did Dutch TTF. In that environment, it is natural to expect European power markets to start behaving like a seemingly ‘simpler’ fossil story again.
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In Modo’s analysis, higher gas prices lift peak power prices, and battery revenues rise with them. Its sensitivity analysis says a 50% rise in gas prices combined with a 40% increase in carbon prices lifts day-ahead battery revenues by 28%.
Wood Mackenzie makes the transmission story equally explicit, arguing that gas price spikes still pass through to electricity prices despite structural changes since 2022, and saying that when TTF rises by €30/MWh, German power prices rise by €40/MWh. Montel, too, has highlighted a world of sharply rising storage revenues, intense volatility, and gas-fired generation setting increasingly high marginal prices.
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All of that is important, but the best analysis (including Modo’s in particular) doesn’t stop there.
