Natural gas and electricity: seasonality, storage and European gas hubs (TTF)

What you will learn

• How gas is quoted at Henry Hub and TTF and how to convert between the two
• Why storage and seasonality shape European gas prices and the summer–winter spread
• How the EU gas storage rules work in general
• Why electricity prices behave differently and how the spark spread links gas and power

Explanation

Units and hubs

Gas is traded as energy. In Europe the unit is the megawatt hour (MWh) and prices are in €/MWh. In the United States the unit is the MMBtu (one million British thermal units) and prices are in $/MMBtu. Conversion: 1 MWh = 3.412 MMBtu.

• Henry Hub in Louisiana is the US benchmark; NYMEX futures cover 10,000 MMBtu.
• TTF (Title Transfer Facility) is a virtual trading point in the Netherlands and Europe's main gas benchmark. ICE Endex Dutch TTF futures are quoted in euros per MWh, traded in units of 1 MW per hour over the delivery period, and physically delivered.

Gas moves by pipeline or as liquefied natural gas (LNG) on ships. Flexible LNG cargoes tend to go where prices are highest, so Europe competes with Asian buyers. After pipeline deliveries from Russia fell sharply in 2022, Europe became much more dependent on LNG imports.

Seasonality and storage

Demand peaks in winter (heating) while supply is fairly steady, so storage bridges the gap: sites are usually filled from about April to October (injection season) and emptied from about November to March (withdrawal season).

The summer–winter spread is the price of a winter contract minus the price of a summer contract. A storage owner can buy summer gas, sell winter gas forward and earn the spread minus storage and financing costs. A narrow spread makes filling unattractive, one reason governments set rules.

EU storage rules (general orientation)

An EU regulation adopted in 2022 requires member states to fill gas storage to 90% of capacity. Under an amendment agreed in 2025, the 90% level may be reached at any point between 1 October and 1 December, member states may fall short by up to ten percentage points in difficult market conditions, and the scheme was extended to the end of 2027. National rules can add requirements; check the current version. Daily fill levels are published on the AGSI+ platform of Gas Infrastructure Europe.

Electricity

Electricity cannot yet be stored cheaply at scale, so supply and demand must match at every moment. Prices are set per delivery period in exchange auctions; German power futures trade on EEX.

Prices follow the merit order: plants are ranked from the lowest running cost (wind, solar, nuclear) to the highest (gas, oil). The most expensive plant needed to meet demand often sets the price for that hour. When gas plants are marginal, the gas price drives the power price. In sunny, windy hours with low demand, German prices can fall very low or even below zero.

The spark spread is a gas plant's gross margin: power price − gas price ÷ efficiency. The clean spark spread also subtracts the carbon cost under the EU Emissions Trading System (ETS): CO₂ price × tonnes of CO₂ per MWh of power.

Worked example

Hypothetical example, part 1: converting prices. TTF is €35.00/MWh, EUR/USD 1.10, Henry Hub $3.50/MMBtu.

1. €35.00 × 1.10 = $38.50 per MWh.
2. $38.50 ÷ 3.412 = $11.28 per MMBtu.
3. Gap to Henry Hub: $11.28 − $3.50 = $7.78 per MMBtu, which must cover liquefaction, shipping and regasification of US LNG.

Part 2: storage economics. Summer contract €30.00/MWh, winter contract €36.00/MWh. Storage cost €3.00/MWh. Financing 4% per year for 6 months on €30.00 = €30.00 × 0.04 × 6 ÷ 12 = €0.60.

• Margin: €36.00 − €30.00 − €3.00 − €0.60 = €2.40 per MWh.
• For 100,000 MWh: €240,000, locked in by selling winter gas forward at the start.

Part 3: clean spark spread. Power €100/MWh, gas €35/MWh, efficiency 50%, CO₂ €70 per tonne, emissions 0.37 tonnes per MWh of power.

• Gas cost per MWh of power: €35 ÷ 0.50 = €70.00.
• Carbon cost: €70 × 0.37 = €25.90.
• Clean spark spread: €100 − €70.00 − €25.90 = €4.10 per MWh.
• At a power price of €90 the result is −€5.90, so the plant may not run in those hours.

Excluded: grid fees, operating costs, injection limits and taxes.

Common mistake

Practice activity

Hypothetical data.

1. Convert Henry Hub $4.00/MMBtu into €/MWh at EUR/USD 1.10.
2. Summer €28/MWh, winter €33/MWh, storage cost €2.50/MWh, financing 5% per year for 6 months on €28. Calculate the margin per MWh and for 50,000 MWh.
3. Power €80/MWh, gas €30/MWh, efficiency 55%, CO₂ €60 per tonne, 0.33 tonnes per MWh. Calculate the clean spark spread.

Key takeaways

• Europe quotes gas in €/MWh at TTF; the US in $/MMBtu at Henry Hub; 1 MWh = 3.412 MMBtu.
• Storage turns the summer–winter spread into a business; EU rules set fill targets.
• Power prices follow the merit order, so gas and carbon often set them.
• The clean spark spread shows whether a gas plant earns money in a given hour.

Next step

In the next lesson you turn to industrial metals: copper, aluminium and nickel, and how they follow the economic cycle.