13.06.2025

Monthly Energy Market Update: The Boom of Renewable Energies and Mild Weather Transform the Energy Landscape

In May, the European energy markets experienced a typical transition month due to subdued demand and strong generation from renewable energies. These developments are highly relevant for private investors and savers, as they could have long-term effects on energy prices and market conditions.

Background and Causes

Subdued Energy Demand

The demand for energy was subdued in May, attributed to several factors, including mild temperatures and several holidays. These factors contributed to energy prices coming under pressure on spot markets across Europe.

Strong Generation from Renewable Energies

The generation from renewable energies was particularly strong in May. Solar and hydropower showed robust performance, while wind power production significantly increased after several weak months. These developments led to a substantial decline in spot market prices and new records of negative hourly prices in several markets.

Impact on the Energy Markets

  • Overcapacity and Negative Prices: Several European markets experienced phases of overcapacity, leading to negative electricity prices. In the UK, electricity prices remained negative for up to 17 consecutive hours, with a record low of minus £35.2 per megawatt-hour. In Spain, one-third of hourly electricity prices fell below zero, despite increased curtailment of solar power generation.
  • Market Uncertainty: Despite the positive developments in renewable energy generation, uncertainties remain in the European energy landscape. Geopolitical tensions and market-specific dynamics contribute to this uncertainty.

Relevance for Private Investors and Savers

  • Long-term Effects on Energy Prices: The current developments could have long-term effects on energy prices. An increasing generation from renewable energies could lead to stable or declining prices, making investments in renewable energies more attractive.
  • Market Conditions: Market conditions could further change due to the growing significance of renewable energies. Private investors and savers should prepare for these changes and adjust their investment strategies accordingly.

Further Developments in the Energy Sector

  • Reduction of Gas Demand: The EU has reduced its gas demand by 17% between August 2022 and January 2025, which corresponds to a reduction of 70 billion cubic meters per year. This is part of efforts to decrease dependency on Russian energy imports.
  • REPowerEU Roadmap: The EU Commission has published a roadmap to gradually end remaining gas, oil, and nuclear imports from Russia. This will be supported by legislative proposals in June 2025.
  • PPA Market: The European PPA market experienced a decline in May, with only 14 completed PPAs totaling 350 MW. Solar installations led the market.