Document summary
Germany’s power prices are driven by: supply and demand, and if the nuclear reprieve is confirmed this will make for comfortable capacity margins going forward; national and EU regulations, the most important being the EU’s emissions-reduction target; and fuel prices outlook, with EU demand only modestly recovering, fuel-input prices remain depressed with short-term outlook for gas prices clouded by over-supply. Against this background the near-to-medium term outlook for power prices is unexciting, nevertheless Deutsche Bank’s base-case scenario for EU carbon prices over the next six months implies increasing German power prices of €3-4/MWh per year giving upside potential of 8%.