(Montel) German gas plants produced the most power in nine years last year while coal and lignite output dropped, a trend that may extend into this year, albeit at a slower pace, analysts told Montel this week.
German gas plants produced 59.1 TWh of power last year, the highest since 2011, data from German think tank Fraunhofer ISE showed, an increase of 12%. Other fossil-fuelled plants produced less power on a year-on-year basis.
Hard coal-fired units saw the biggest loss, at 28%, to 35.6 TWh, while power output from lignite dropped 20% to 82 TWh, the lowest in at least 18 years for both fuels, the data showed.
“The trend should continue, but not as apparent as last year, given the current fuels and carbon prices,” said Sigurd Lie, power analyst at StormGeo.
Last year, German gas plants benefited from record low gas prices as the pandemic hampered demand amid rising carbon costs.
This year, gas prices started a recovery due to a cold Asian winter, which is rapidly absorbing last year’s oversupply, and as tighter EU climate goals continue to boost carbon prices.
The Dutch TTF front-month contract, Europe’s most liquid, soared to a two-year high on Monday, at EUR 20.28/MWh, after hitting an all-time low at EUR 3.38/MWh last May.
Carbon prices have continued their upward trend amid tighter EU climate goals and a shortage in allowance volumes amid auction delays. Earlier on Friday, the carbon benchmark Dec 21 EUA contract hit a new record high at EUR 35.18/t on Ice Futures.
Higher coal demand
“Gas [should be] the preferred fuel compared to hard coal for all months, but the price difference is not so big that all gas plants outcompete the most efficient coal plants,” Lie said.
“Despite gas in general being cheaper, coal demand will be higher than last year during this winter unless it turns very mild and windy,” he added.
Sina Heidari, power analyst at ICIS, agreed.
“In 2021, we will see about the same coal and lignite generation as well as gas,” he said, with around 60 TWh of gas and around 100-110 TWh from coal and lignite.
Gas to outpace coal
By 2023, gas should outpace coal and lignite and produce around 100 TWh, with only 80 TWh stemming from hard coal and lignite, he added.
Also, expansion of green power sources should lead to a higher market share of renewables at the expense of coal, he added.
“In 2020, we had 180 TWh of wind and solar which, according to our forecast, increases to 225 TWh in 2023, which opens up a window for more operation of gas turbines,” he said.
The decline of coal may not be as pronounced this year, said Bruno Burger, researcher at ISE Fraunhofer. But a recovery to levels seen some six years ago, when hard coal plants produced three times or more power than gas units, is unlikely.
Germany aims to exit coal-fired power generation by 2038 and to cover at least 65% of its gross power demand from green sources by 2030.