Q1 2025 power market review Hungary versus Germany

The first quarter of 2025 brought significant volatility to European power markets, driven by a rare combination of cold weather, weak renewable generation, and surging gas demand. As consumption soared in early February, Germany, the continent's benchmark power market, recorded both unusually high demand and historically low wind generation. This commentary, that compares the situation in Germany with Hungary, dissects the key drivers of Q1 market behaviour and outlines what to watch for in Q2 and Q3.

Cold winter drives up consumption and gas-to-power

Early February 2025 saw a proper winter return to Europe, with above-average heating demand across major European power markets. In Germany (the biggest power market in the EU), this translated into elevated gas-to-power generation and system-wide strain. EU gas storage levels fell to 34% by the end of March, underscoring the sustained draw on reserves due to heating and power generation.

Germany’s wind generation collapses

Wind generation in Germany plummeted in February, averaging just 14 GW hourly compared to 23.8 GW in February 2024, which represents a 42% drop. This deficit placed further upward pressure on gas-fired plants, whose short-run marginal costs rose to over 100 EUR/MWh, up from 84 EUR/MWh at the end of 2023.

Geopolitical cooling and renewable recovery bring relief

From the second half of February 2025, peace talks between the USA and Russia regarding the Ukraine conflict began, coinciding with milder weather in Western Europe and a rebound in renewable generation. These parallel developments led to a notable decline in prices across the broader energy complex.

Q1 2025 Spot power prices – key trends

Germany, as one of the most important benchmarks for European Power prices, cleared Q1 2025 with an average of EUR 111.94/MWh for the hourly spot prices, EUR 44.27/MWh above Q1 2024. (+65%).

The short-run-marginal cost of gas fired power plants (55% efficiency) being slightly above EUR 100/MWh (an increase of 22% from ca. EUR 84/MWh at the end of 2023) along with the aforementioned trends on consumption and renewable generation were the most important factors behind the price increase.

Before the delivery period started for Q1 2025, at the end of 2024, the Quarterly Power Future contract traded between from ca. 95 – 110 EUR/MWh, so the spot market delivered at the top of the ‘estimation’ of the market.

Post-nuclear Germany becomes net importer

Following the closure of the last 3 nuclear power plants on 15 April 2023, Germany’s net import position continues to grow. We can observe this trend from Q1 2025 as an hourly average below. Net imports were above 2,100 MW, ca. 260% above the same levels seen in Q1 2024.

Most imports originated from Denmark, the Netherlands, and Norway, reshaping cross-border trade flows.

CSEE Spotlight: Hungary emerges as key exporter

Power prices in Central and South Eastern Europe (CSEE) also surged. North Italy led with EUR 138.37/MWh, followed by Hungary at EUR 136.03/MWh - EUR 23.57/MWh above Germany. Hungary’s demand in February rose 11.5% year-on-year to an hourly average of 5,809 MW, up from 5,213 MW in 2024. Meanwhile, gas-fired generation soared 73%, from 789 MW to 1,364 MW hourly.

Hungarian spot prices, a common benchmark for Central and South Eastern Europe were effected by increased demand (compared to the last 2 years) due to cold weather and increased power generation from gas then in the last 2 years.

Hourly average demand was 5,809 MW in February 2025, up from 5,213 MW a year earlier (+11.5%).

Average hourly gas generation peaked at 1,364 MW in February 2025 from 789 MW a year before (+73%).

While Hungary’s net import position (average of ca. 1,500 MW) did not change significantly in Q1 2025 compared to Q1 2024, the composition of the flows via Hungary changed a lot.

In Q1 2024, Hungary exported an hourly average of 103 MW (with January registering the highest value of 329 MW) towards its eastern/southeastern neighbours - Croatia, Serbia, Romania and Ukraine. The same metric was measured at 753 MW in Q1 2025, more than seven times higher on these borders. The highest levels of exports were to Romania (an hourly average of 663 MW) making up most of the increase in this flow from a year before.

Similarly to Q3 2024, the dry weather conditions led to very weak hydro generation in South Eastern Europe all along Q1 2025, for which the Romanian import increase from Hungary is a striking evidence. Run of river hydro generation dropped to 760 MW (hourly avg.) in February 2025, from 1,310 MW a year earlier (-42%).

With wind generation equally delivering well below the last few years average:

Looking Ahead: Indicators for Q2 and Q3

The interplay between power generation from gas, renewable energy sources, and geopolitical developments will remain critical for Q2 and Q3. Traders should watch:

• EU gas storage refill rates

• The frequency and share of power generation from gas in the fuel mix

• Renewable generation trends

• Net export-import trends into Germany and SEE

• Hydrological conditions in the Balkans