European TTF and carbon prices rise to near five months high in perfect sync

Middle East tensions, together with renewed uncertainties around Russian gas and lower Norwegian piped gas deliveries all supported higher TTF prices in recent months -despite plummeting gas-fired generation and high storage levels.

TTF and carbon prices displayed an almost perfect correlation since the beginning of the year, with an average of around 0.9.

The coal/gas switching corridor remains the most important reason behind this intimate relationship: higher gas prices are pulling up emission allowances, supporting the cost-competitiveness of gas-fired power plants against coal-based generation.

But other reasons could have strengthened further this relationship, including the rise of algo trading and hedging strategies which tend to pair TTF/EUA futures.

The strong increase in gas and carbon prices is ultimately supporting higher electricity prices, with Germany’s month-ahead up by almost 40% since the start of April.

Source: Greg Molnar (LinkedIn)