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Power producers in western Europe are expected to increase gas-fired generation, instead of coal, as gas-output profitability for power generation increased amid lower prices, according to S&P.
- The relative profitability of burning gas has increased as prices dropped, while the cost of coal has stayed relatively high. Gas plants with an efficiency of 55% are able to out-compete 40% efficient hard-coal units in some markets, according to Sabrina Kernbichler, a power analyst at S&P Global Commodity Insights.
- Coal-fired power generation in the European Union rose 1.5% last year according to think tank Ember.
- In addition to margins, below-average rainfall in most of Europe in recent weeks has increased concerns that low river levels at the Rhine lead to a struggle to get coal to the stations that need it, further incentivizing the switch to gas-fired generation.
- The difference in profitability is most clearly seen in the day-ahead markets and forward prices through to the end of summer, according to Kernbichler.
- TTF MAR 23 down -2% at 50€/MWh
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