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Lower Gas Prices Incentivise Coal-to-Gas Switching

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Lower European natural gas prices and high carbon prices are providing an incentive for coal-to-gas switching in power production according to S&P Global.

  • In Germany 55%-efficient gas plants can outcompete 40%-efficient hard coal units in the day-ahead market and the trend is likely to continue based on summer forward prices. German 50% gas plants remain uncompetitive against modern 45%-efficient coal plants.
  • In winter 55%-efficient gas units would be able to replace older 38%-efficient coal units and CCGT high efficiency 59% units would be competitive with newer 40% hard coal plants.
  • In Germany, about 60% of hard coal capacity has an efficiency of 40% or lower and about 55% of gas-fired capacity is likely to have an efficiency of 55% or higher.
  • Coal and lignite generation in Germany's fell to 69% in the first half of March, compared with 73% in both January and February. Gas-fired generation rose to 30% in the first half of March up from about 26% in January to February and from 22% in March 2022.

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Lower European natural gas prices and high carbon prices are providing an incentive for coal-to-gas switching in power production according to S&P Global.

  • In Germany 55%-efficient gas plants can outcompete 40%-efficient hard coal units in the day-ahead market and the trend is likely to continue based on summer forward prices. German 50% gas plants remain uncompetitive against modern 45%-efficient coal plants.
  • In winter 55%-efficient gas units would be able to replace older 38%-efficient coal units and CCGT high efficiency 59% units would be competitive with newer 40% hard coal plants.
  • In Germany, about 60% of hard coal capacity has an efficiency of 40% or lower and about 55% of gas-fired capacity is likely to have an efficiency of 55% or higher.
  • Coal and lignite generation in Germany's fell to 69% in the first half of March, compared with 73% in both January and February. Gas-fired generation rose to 30% in the first half of March up from about 26% in January to February and from 22% in March 2022.