Gas stocks in Europe could be more stressed this summer due to less hydro and wind.

The wind speed and lower hydropower stock in Northwest Europe could increase demand for gas-fired and coal-fired electricity generation this summer, at a moment when Europe needs to replenish storage that has been depleted following the winter.

LSEG data revealed that hydro levels and snowpack are now well below the average levels in continental Europe. They were also much lower than those recorded in 2024. Meanwhile, gas demand is on the rise year-on-year.

In recent months, Europe's gas consumption has increased due to weak wind speeds. Low snow levels are expected in the Alps this spring and summer.

Gas storage in the region is only 39% full - 33% less than last year.

Rystad Energy analysts have reduced their projections of annual growth in European wind energy generation from 39 to 9 TWh due to a decrease in wind speed. The total output for 2024 is 595 TWh.

This will increase pressure on other power sources. Fabian Roenningen, Rystad's analyst, said that this usually comes from "fossil & other", which is made up of coal and gas in excess of 90%.

Rystad's annual gas-for power demand forecast for 2025 has been increased by as much as 6%.

Roenningen stated that "if this happens, it will be the first year in Europe since 2019 where gas for power demand has increased solidly."

The hydro reserves that could be used to cover periods of low solar and wind power are also lower this year due to a drought in Germany, and a low snowpack in the Alps. These two factors have a major impact on Swiss hydropower production.

German weather bureau DWD reported that March and early April saw extremely dry conditions in Germany. In some areas, the upper soil moisture levels were up to 20% lower than long-term minimum values.

The Rhine River was restricted in its navigation due to the low rainfall. Ships were sailing with reduced cargo and freight surcharges were imposed as compensation.

In the northeastern part of France, soil conditions are at their lowest levels ever recorded in mid-April. Normally they would be at their highest by end May.

This year, we will generate much less hydropower than last year. "We expect this to have a positive impact on power prices," said LSEG Analyst Peter Nordby. He added that France would lose close to 15 TWh in hydro production.

Conditions that are sunny and dry are ideal for solar energy production. However, they can be problematic in the evenings when the sun starts to dim, and other sources of power need to increase.

Nordby stated that "we see an increase in gas for power demand during the shoulder hours".

Rystad's Roenningen estimates that gas-for power generation could increase by 2.7% on average between April and August, assuming a year-on-year growth in solar power of 15-20%, with demand rising between 1.5-2%.

Gas-for-power demand may increase, putting pressure on European gas rates and driving them up.

(source: Reuters)