LITTLETON, Colorado, April 24 (Reuters) - Europe's households and businesses are starting to get a reprieve from high energy bills as regional power costs fall sharply from their 2025 peaks.

Wholesale spot power prices across most of continental Europe have more than halved since hitting two-year highs in early 2025, thanks to a sharp retreat in regional natural gas costs which are down by a third since January.

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Expanding output from regional clean power sources - particularly solar farms - has also helped push power costs lower, and should provide some cushioning to Europe's utilities and energy consumers following an expensive start to the year.

GASSED OFF

European utilities were forced to boost gas-fired power production during January to March of 2025 to the highest levels in three years due to sharply lower output from wind farms.

Cumulative output from wind farms was down 15% during the first quarter of 2025 from the same months in 2024, data from Ember shows, because wind speeds were below normal at turbine level.

As wind power traditionally accounts for around 15% of total electricity supplies in Europe, regional utilities had to compensate for that drop in clean supplies with higher output from natural gas plants.

Total gas-fired electricity supply during the January to March period was 332 terawatt hours (TWh), which was 7% more than during the same months in 2024 and the highest since 2022.

The higher gas generation total helped push natural gas' share of Europe's electricity generation mix to nearly 26% for the opening quarter of 2025, from less than 24% in 2024.

In turn, that higher gas dependence during the peak winter heating season for Europe helped push up regional natural gas prices, which rallied by around 20% to two-year highs during the opening eight weeks of 2025.

As gas accounted for the largest source of power for European utilities during that period, power suppliers were forced to pay up for the gas they needed, and pass on some of the costs to consumers in the form of higher energy bills.

These higher power bills placed fresh strain on European businesses and households, which were already dealing with weak economic growth and renewed tariff turbulence from the new administration of U.S. President Donald Trump at the time.

BRIGHTER OUTLOOK

With winter now over, European utility gas-fired power production is set to contract sharply.

Over the past three years, gas-fired electricity output in Europe dropped by 25% between March and June, as demand for heating halted and output from solar farms peaked.

A similar reduction in gas generation in 2025 could help drive regional gas prices lower still, and help reduce costs for power producers across the region.

A key caveat is that utilities and storage operators need to replenish stockpiles ahead of next winter, which should sustain some gas purchases even as gas-fired generation drops to the lowest levels of the year.

However, the total volume of gas purchases is likely to be notably less than the volumes seen during the opening quarter of the year.

That in turn should limit upside momentum to gas prices over the coming months, and help regional power costs continue to trend lower.

LOW POINTS

So far in April, wholesale peak power prices in Germany - Europe's largest economy and power consumer - have averaged around 72 euros per megawatt hour, according to data from LSEG.

That compares to a peak of around 144 euros in February, and so means that the latest power costs are half of what they were just two months ago.

Power costs in the Netherlands and Poland are down by a similar degree, while in Spain power costs are more than 80% below their February peak. Power costs in Italy - frequently the highest in Europe - are down a third from their 2025 peak.

Some additional power price weakness is likely to emerge over the coming month or so, as regional solar power output climbs to its annual peak and floods regional power grids with surplus electricity.

In 2024, the month of May marked the low point for wholesale power prices in France, the Netherlands, Germany and Poland, and prices will likely approach their bottom around that time again this year.

And if power costs were to retreat all the way to the lows of last May, then prices in Germany may drop by another 20% or so before bottoming.

However, current power prices are already below their 2024 average, which suggests that further downside room may be more limited - especially if power firms incur additional costs this year from gas stock rebuilding and ongoing grid upgrades.

Regardless of how much lower they fall, however, the fact that power costs are already sharply below their early-2025 peaks should provide energy consumers of all sizes with some price relief compared to the high bill prices seen this winter.

The opinions expressed here are those of the author, a market analyst for Reuters.

https://www.reuters.com/business/energy/europes-power-costs-plunge-gas-led-heating-season-ends-maguire-2025-04-24/