German 55% efficient gas plants beat 40% efficient coal plants
Coal-to-gas switch could remain firm through winter of 2023
European Coal Price Rise Potential: Traders
Further losses at Europe’s major natural gas hubs are providing incentives to accelerate the switch from coal to gas in electricity production, according to a March 17 analysis by S&P Global Commodity Insights. It was shown that this trend is likely to prevail.
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“The gas industry has managed to significantly increase its market share in the highly competitive electricity market,” said a European-based coal trader.
strong summer switch
A US-based coal trader said: It was June 2021 in this area. “
In fact, Germany’s THE hub gas prices are now so low that a 55% efficient gas plant can beat a 40% efficient anthracite unit in the day-ahead market, says Sabrina, lead power analyst at S&P Global. says Sabrina Kernbichler.
“This trend … will continue from Q2-2023 to Q3-2023 based on current gas, coal and carbon forward prices,” Kernbichler said.
The switch from coal to gas is likely to ease as markets head into winter 2023, but based on current fuel switch price signals, 55% efficient gas-fired power plants will outperform older 38% efficient Coal power plants can still be replaced. in merit order. In addition, highly efficient CCGTs with 59% efficiency will compete with new anthracite plants with 40% efficiency.
According to S&P Global, about 60% of installed anthracite coal capacity in Germany has an efficiency of 40% or less. About 55% of the German gas-fired power plants that came online between 2000 and 2022 are likely to have an efficiency of 55% or higher.
spark vs dark
Data from S&P Global shows that the gap between Clean Spark Spreads (CSS) and Clean Dark Spreads (CDS) has narrowed significantly in recent weeks.
For example, the CSS difference between a 50% efficient gas plant and a 45% efficient coal plant in the previous month in Germany is €15.4/MWh as of March.
By comparison, when European gas and power prices hit record highs, the corresponding price gap reached €26.7/MWh last month and €319.5/MWh in August.
Germany’s 50% gas plants are still not competitive with modern coal plants with 45% efficiency.
Traders expect TTF’s previous month price to fall below the Eur40/MWh mark and stay low until mid-Q2 or early Q3, so gas prices may fall, but coal Prices may recover.
A US-based coal trader said the switch “makes sense given the falling gas prices.” “I see a lot of ships destined for Europe. [coal] The strike diverted cargo to Asia at lower prices. “
Traders added that coal prices will rise as end-users seek domestic supply as not enough cargoes are available in the market.
Space for fossil fuels shrinks
The combined share of solid coal and lignite in total German fossil power generation was decreased to 69%.
Similarly, the share of gas-fired power generation in the fossil fuel mix (including fuel oil) rose to 30% in the first half of March. This is up from about 26% in February and 22% in March 2022 from January 2022.
That said, full gas-fired generation is up slightly so far as the fossil power space in Germany narrowed to 26GW in early March.
According to Kernbichler, this was down by about 3 GW year-on-year, or about 2 GW over the month, due to continued declines in electricity demand coupled with strong renewable energy supply.
