(Montel) Current market signals suggest that coal-fired power plants in Germany should run at "full speed" in the fourth quarter, said analyst Diana Bacila at Nena on Wednesday.
Highly efficient gas-fired power plants in Germany have returned to profit amid rising coal prices in recent months, but the current forward curves for coal and gas suggest that coal-fired plants become
increasingly profitable from Q4 this year, Bacila told Montel’s Price Drivers conference in Oslo.
Coal prices on the API 2 curve suggest a drop from USD 73.20/t in May to USD 70/t in Q4, according to Ice Futures, while TTF gas should rise from EUR 15.80/MWh in May to EUR 16.65/MWh in Q4.
This will make coal relatively more profitable for power production than gas.
Prices to soften?
Coal prices have risen strongly over the past year, fuelled by strong demand from Asia, but prices were likely to soften in the coming months due to strong supply from Russia, Columbia and the US, combined with an expected improvement over the rest of the year in production in China, Indonesia and Australia, said Bacila.
Nena expects average coal prices on the API 2 curve will drop to USD 69.50/t in Q4, before falling further to USD 67.60/t in Q1 next year.
The clean spark spread for a highly-efficient gas-fired power plant of 60% efficiency was last seen at around zero for May, while the equivalent margin for a less-efficient coal-fired plant was last pegged at EUR -1.89/MWh, according to Montel data.
The coal margin – the so-called clean dark spread – should improve to EUR 2.06/MWh in Q4, above the gas margin of EUR 1.10/MWh.
Power production from gas-fired plants in Germany rose 44% to 43.2 TWh last year amid lower prices, according to figures from research institute Fraunhofer ISE.
Reporting by:
Olav Vilnes
olav@montel.no
16:03, Wednesday, 26 April 2017