(Montel) There will be little need for coal-fired generation until the end of the summer amid lower demand due to the Covid-19 pandemic and cheaper generation alternatives, StormGeo said on Thursday.
“There is practically no demand for hard coal this spring and early summer and only limited after that,” said Sigurd Lie, senior analyst for continental Europe at Oslo-based StormGeo, during a webinar.
Given the very low gas prices at present, it was the preferred thermal fuel in the region at the moment and “will be for many months” to come, he added.
Gas enjoyed a “significant” price advantage over coal, which was unlikely to become cheaper as it already traded close to the marginal costs of Russian producers – a key supplier for Europe, Lie said.
API2 front-month coal last traded at USD 45.45/t, up USD 0.45, on Ice Futures. Front-month TTF gas was last seen at 7.03/Mwh at one broker.
Cheap gas
“Even with an EUA price of EUR 0/t, gas will still be cheaper than firing a coal plant.”
Combined cycle gas turbine (CCGT) plants, meanwhile, could see their short-run marginal costs drop to below EUR 19/MWh, he added.
Lignite and possibly hard coal would mostly run “during weekdays and peak hours and after all CCGT gas capacity in all CWE [central west Europe] and bordering countries is utilised”.
Plentiful generation would also continue to meet low demand amid the lingering effects of the virus, though the outlook depended on government action and the lifting of restrictions, Lie said.
So far, consumption in Germany had dropped 10% and “is very likely to see a further drop this summer”, unless restrictions to control the spread of Covid-19 were lifted, he added, referring to draconian measures to curb the spread of the virus, which has infected 2m worldwide.
“Our current assumption for the coming summer is a reduction of 12.5%, roughly 6,000 MW.”
Lockdown continues
On Wednesday, the German government announced social distancing measures would remain in place until 3 May, although some shops would be allowed to open again from next Monday.
With respect to the Q3 power price impact, Lie said StormGeo believed “there are still a few euros downside”.
German Q3 baseload last traded at EUR 31.35/MWh and its French counterpart at 30.70/MWh.
Both posted steep increases in the current session after France’s EDF announced a 20% cut to its 2020 nuclear power production target.
A poll by Montel of analysts saw them slash forecasts of the average German front-year power price 15% over the course of this year, compared to initial predictions taken in December, due to the impact of Covid-19.
Meanwhile, in a report on Wednesday, consultancy Icis predicted Germany’s gas-fired turbines were likely to see their revenues fall more sharply than those of other power plants affected by reduced electricity consumption from coronavirus lockdowns.
Reporting by:
Nora Kamprath Buli
nora@montelnews.com
15:59, Thursday, 16 April 2020