- A potential peace deal in Ukraine could have significant implications for the European gas and power markets, according to Goldman Sachs.
The bank said in a note Wednesday that the resumption of Russian gas flows, even at reduced levels, could drive down energy prices and introduce volatility in key stocks across the sector.
Goldman Sachs notes that before the conflict, Russia supplied "c.35% of EU gas needs," keeping long-term gas prices (TTF) in the "low €20s/MWh."
By late 2022, Russian supply had fallen to "c.10%," triggering a supply shock that pushed prices to nearly "€300/MWh."
Although the EU has signaled no intent to increase Russian gas imports, Goldman Sachs highlights that Russian gas remains the "cheapest source" at an estimated cost of "below €10/MWh."
If Russian gas flows were partially restored, Goldman Sachs forecasts that the "1-year gas forward curve could drop by c.25%-50%," with German power forward prices potentially falling from "c.€95/MWh to about €50-70/MWh."
They note that this would reduce household energy bills and improve industrial competitiveness.
Such a shift could lead to "significant volatility" for renewable energy (RES) developers such as EDPR, RWE (LON:0HA0), Orsted (CSE:ORSTED), Acciona Energia, and Solaria, as well as traditional power and commodity firms like Fortum (HE:FORTUM) and Centrica (OTC:CPYYY).
However, Goldman Sachs highlights defensive stocks like "EON, National Grid (LON:NG), Enel (BIT:ENEI), SSE (LON:SSE), and Iberdrola (OTC:IBDRY)" as more stable investments in this scenario.
Despite near-term risks, the bank sees a long-term opportunity. "With most RES developers trading well below the value of their operating assets," Goldman Sachs argues that a market downturn could create an attractive "buy-the-dip" moment, similar to post-2008 conditions. A potential surge in data center power demand could further bolster the sector’s recovery over time.