Source: Yan Qin, Refinitiv
With record low gas prices and high carbon price, most coal plants and even lignite plants are out of the money in Germany. Only the minimum level of coal plants are kept running in Germany despite losing money.
German weekly average power demand is still 13% below normal levels with slow recovery of economic activities from easing COVID-19 lockdown. This combined with strong renewables output and high carbon prices will continue to squeeze coal out of the generation mix.
This chart shows that lignite plants are out of the money at least until 3 months ahead, or the autumn. Fuel switching has been running at full speed since the beginning of the year with very low gas prices in combination with very low gas prices, high renewable production and lower demand due to covid-19.
German weekly average power demand is still 13% below normal levels
When looking at the CO2 switching price for 35% efficient lignite to 50% efficient gas plants (chart below), we now see the that lignite is below the forward curve in the short (three next moths). Orange line, CO2 switching price lignite 35% efficiency – 50% gas). Green line is EUA price on Monday and it rose even higher to 24.5 euro today.
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