* Wholesale power prices down over 40 pct since 2011
* UK prices to be higher than average, but political risk is
* Nordic prices to be lower due to large hydro capacity
By Vera Eckert
FRANKFURT, July 2 Europe's utilities will
continue to suffer from low wholesale power prices eroding their
revenues until the end of the decade as rising renewable output
and low demand combine, rating agency Moody's said on Wednesday.
Europe's power generators have been squeezed by the
expansion of renewable energy, which is creating overcapacity
and eroding prices, while profitable coal-fired power stations
are forced to close under European climate protection policies.
Benchmark German wholesale power prices have fallen over 40
percent since spring 2011, when Japan's Fukushima nuclear
reactor meltdown pushed up global energy prices.
At the same time, demand has been contracting during the
euro zone crisis and because of improving energy efficiency.
Rating agency Moody's said that it expected this trend to
continue to negatively affect Europe's utilities.
"In our view, there will be further policies and reforms,
which will negatively affect the European utility sector," the
The amount of installed renewable capacity, mainly solar and
onshore wind, in Britain, France, Germany, Spain, Italy and the
Nordic region increased to 290 gigawatt (GW) at the end of 2013,
the equivalent of almost 300 standard European nuclear power
stations, and up from 205 GW in 2009.
Moody's said that Spain's Iberdrola, Britain's SSE
, Germany's EWE as well as France's EDF
and GDF Suez were the best placed utilities in
German sector leaders E.ON and RWE were
put in the midfield in terms of negative impact.
For Germany, Moody's said that the commissioning of new
generation capacity would continue to keep power prices low,
between 30-34 euros per megawatt-hour (MWh), depsite the
retirement of its remaining nuclear power stations by 2022.
"The government's energy policy currently gives little
protection to unprofitable plants. Changes to the market
framework may only kick in from 2017 while the government is
reluctant to intervene too heavily," Moody's said.
For Italy, Moody's said that weaker gas prices and low power
demand would drive wholesale power prices lower through to 2020,
hurting utility earnings, forecasting a price decline from 52-54
euros per MWh today to 47-52 euros a MWh by 2020.
For Britain, the rating agency said that while power prices
of around 50 pounds ($85.08) per MWh would remain higher than in
continental Europe, utilities would face regulatory and
political risk, with the main threats coming from a debate
around energy bills ahead of a general election next year.
Moody's said that French state-controlled utility EDF
, which operates the world's biggest nuclear power plant
fleet, would also be hit by weak wholesale prices, especially as
regulated tariffs disappear and remove its protection from weak
Moody's said that Spanish utilities could hope wholesale
power prices could rise from 47-50 euros a MWh today to 49-52
euros per MWh by 2020 as coal-fired plant closures and a slight
increase in demand lifts prices.
Moody's expected Nordic power prices, which include non-EU
member Norway but exclude Finland, to remain amongst the lowest
in Europe, ranging from 26-31 euros/MWh through to 2020 as new
capacity will add to an already existing abundance of hydro,
wind and conventional power plant capacity.
($1 = 0.7331 Euros)
($1 = 0.5877 British Pounds)
(Reporting by Vera Eckert, editing by Henning Gloystein)