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April 9, 2025
April 2025
Introduction:
It’s now 3 years since Russia’s invasion of Ukraine in 2022 which resulted in never before seen gas prices across Europe. This resulted in a sharp increase in both electricity supply costs for consumers and industry but also for generators with renewable technologies exporting electricity back to the grid. This proved how volatile the market is and how closely aligned electricity prices are to gas prices, if one goes up the other will follow.
The below graph illustrates the increase in gas prices from the beginning of the war in Ukraine:
Prices vary from year to year according to global factors and the electricity market is extremely volatile where within-day pricing movements occur regularly. With such volatility many generators often ask when is the best time to lock-in a price or why are prices where they are.
(See previous blog on Zevon website!)
There are a number of factors that affect energy prices and over the last few years since the global pandemic we have seen prices collapse in 2020 then recover in 2022 to record high levels never seen before.
Generators will have benefitted from single digit prices and within 2 years many generators received price offers four times higher than before.
What is shaping prices at the moment?
As we saw in 2023 when prices recovered to pre-war and pre-pandemic levels, gas storage levels play a significant role in gas pricing. In 2023 we saw record levels of gas storage at 99% capacity. This led to a period of relative stability in pricing terms for generators. As of March 2025 gas storage levels are somewhere in the region of 30%. Summer pricing runs from April to October each year with winter running from October to April. In general, prices in winter are higher than in summer (excluding 2022 when Nordstream pipeline was shut down). Summer is typically the time when gas storage levels are refilled however at this moment in time the price of gas doesn’t justify the spend as summer prices are trending higher than winter prices later in the year. See graph below:
Where is the market now?
At the time of writing gas storage levels are somewhere in the region of 30%, according to data from Gas Infrastructure Europe, after a winter with less wind and colder temperatures in Europe. Higher gas storage levels, as discussed in a previous blog, protects the UK and Europe from volatility and major shifts in pricing patterns. There is now an EU Quota, recently introduced in light of the war in Ukraine, which states that there must be 90% gas storage levels by 1st November each year with a view to protecting against price surges and meet demand in the winter months.
Following on from the announcement last week regarding the re-introduction of US tariffs we have seen a significant drop in gas prices in the region of 20% in April. This will impact electricity prices for generators looking to lock in a price in the coming weeks and months. Looking deeper with the re-introduction of tariffs to countries some forecast a drop in gas demand now as gas intensive industries across the world may revise their operations. European gas levels may continue to drop with lower demand in addition to strong wind outputs and solar energy as we approach the summer months.
Where we saw supply levels potentially stretched in the past few years was the possibility of a cold winter in Asia and increased demand there from China as it moves away from coal. Now China has a 34% tariff it may lead to a decrease in demand there thus leaving more gas available to Europe to buy and refill.
Why use Zevon?
If you are interested in discussing your PPA and wish to discuss prices please contact James on 0131 357 5747
Disclaimer:
We’ve used all reasonable efforts to ensure that the content in this article is accurate, current, and complete at the date of publication. Zevon Energy considers that the information and opinions given in this blog and all other documentation are sound, all parties must rely on their own skill and judgment when making use of it. Whilst every effort is made to ensure the accuracy of any information or material contained in or associated with this document, none of Zevon Energy, their affiliates and employees, either individually or collectively accept any responsibility for any loss, damage, cost or expense of whatever kind arising directly or indirectly from or in connection with the use by any person whomsoever of any such information or material; neither do they make any representation or warranty as to the accuracy or completeness of the data, information or statements contained herein.
References:
Abnett, K et al. (2023) Europe heads more comfortably into winter without Russia’s Nord Stream gas. Available at: https://www.reuters.com/markets/commodities/europe-heads-more-comfortably-into-winter-without-russias-nord-stream-gas-2023-09-26/ (Accessed 13/11/2023)
Morely, B. (2022) Energy prices: how COVID helped them to surge – and why they won’t go down any time soon. Available at https://theconversation.com/energy-prices-how-covid-helped-them-to-surge-and-why-they-wont-go-down-any-time-soon-175679 (Accessed 6/11/2023)
Buli, N (2025) Europe could need extra $11 billion of gas to refill winter stores. Available at: https:// https://www.reuters.com/world/europe/europe-could-need-extra-11-billion-gas-refill-winter-stores-2025-04-01/ (Accessed 4/04/2025)
Rashad, M et el. (2025) Asian spot LNG prices at nearly 6 month low on muted Chinese demand. Available at https:// https://www.reuters.com/markets/commodities/asian-spot-lng-prices-nearly-6-month-low-muted-chinese-demand-2025-03-28/ (Accessed 28/3/2025)
Author: James McKay