New EU Energy Market
2023.02.21 14:15
New EU Energy Market
By Tiffany Smith
Budrigannews.com – Since coal became the cheaper fuel source last year, European power generation from gas-fired power plants has become more cost-effective as a result of falling gas prices and rising coal and carbon costs.
The shift in prices between “clean-dark” and “clean spark” indicates that gas power is becoming more cost-competitive, according to analysts. However, supply security remains a challenge, particularly for nations that previously relied on Russian gas.
When mandatory carbon emissions permits and fuel purchases are taken into account, the prices paid for operating a coal- or gas-fired power plant are represented by the clean-dark and clean-spark spreads, respectively.
Refinitiv analyst Nathalie Gerl stated that Germany, the Netherlands, and Italy could see significant coal-to-gas conversions. Additionally, Germany will need to fill a 4 GW generation gap as the nation permanently phased out nuclear power in April.
She added, however, that in order to replace more effective coal plants, the price of gas would need to drop a little bit more.
During the energy crisis that occurred last year, Germany and other European nations relied heavily on both gas and coal power, with coal’s share of the power generation mix returning after having largely decreased over the preceding decade.
According to Rystad analyst Fabian Ronningen, competition between the two fuel sources is expected to get much closer in 2023, but there won’t be a big switch from coal to gas because gas is still scarce.
Prices have decreased as a result of improved winter imports of liquefied natural gas (LNG), but they should stabilize once they reach the average long-term LNG contract price.
While European carbon allowances (EUA) reached a record high of over 100 euros per tonne, the Dutch benchmark wholesale gas contract fell to a new 17-month low on healthy supply earlier.
