German power opens Q3 at €100 as heat and solar drive competing forces
German front-month power reached €100.36 per megawatt-hour on Friday (2026-07-03), up 2.1% in morning trade, as the start of the third quarter extended a pattern analysts had been tracking since May: rising baseload costs and solar-driven price collapses pulling in opposite directions.1,2
The Q2 analysis that informed that view was stark. Montel reported in mid-May (week of 2026-05-18) that analysts expected German Q2 spot power prices to average around 17% above the year-earlier level, while natural gas — the marginal generation fuel — was forecast to run 40% higher on the year, averaging EUR 46.35 per megawatt-hour, up EUR 13.20 from Q2 2025 levels.1
Solar supply complicated that base case from the outset. Germany's grid recorded spot prices of minus EUR 499.99 per megawatt-hour on 1 May (2026-05-01) as renewable output swamped demand during a bank holiday weekend. Analysts told Montel that Germany would likely see more such episodes whenever surplus renewable supply coincided with reduced demand — a condition that becomes more common as installed capacity expands.2
ICE Endex TTF front-month traded at €45.40 on Friday (2026-07-03), up 1.5%, close to the EUR 46.35 per megawatt-hour analysts had projected for the Q2 average.1 At that gas price level, gas-fired plant remains in the German merit order, but midday solar displaces it directly, depressing afternoon settlement prices while morning and evening ramp periods sustain higher hourly peaks.
Economy minister Katherina Reiche had already addressed the structural issue publicly after the May bank holiday. Negative prices, she said, would cost Berlin millions and demonstrated why Germany needed to rethink its energy system.5 The comments were the clearest acknowledgement from the cabinet that market design was producing outcomes the policy framework was not built to handle.
Policy revisions add a further variable for forward buyers. Berlin's draft Renewable Energy Act revision includes two-sided contracts for difference and other measures targeting grid bottlenecks. Pexapark analyst Conradin Meili warned Montel that the changes could deter short-term power purchase agreements, reducing the flexible off-take volume that otherwise absorbs solar intermittency in the spot market.4
Not everyone is positioned for higher prices. The bearish case on German baseload front-month rests on supply grounds: sustained solar output through July and August may suppress quarterly averages even as peak-hour spikes dominate the headline. Friday's (2026-07-03) price of €100.36 sits between those outcomes, pricing neither a prolonged heat event without wind support nor a mild, overcast summer that would lift gas dispatch significantly.2,1
Germany's power margin — the gap between available supply and actual demand — fell to its tightest level of the preceding heating season during low-wind conditions in mid-May (week of 2026-05-18), according to Bloomberg model data cited by OilPrice.com.3 Wind speeds had dipped across Germany that week, straining a power system that had grown reliant on renewable output during lower-demand periods.
Whether that scenario recurs through summer depends on how often heat events coincide with weak wind generation. A sustained hot, calm stretch would push gas-fired dispatch back into the position it held during the tightest weeks of the preceding season, driving spot prices well above the current forward level — and making Friday's (2026-07-03) move look like an early signal rather than noise.3,5