Coal-to-gas switching incentives for the baseload market hit a new milestone on 24 February with the ICIS Dutch TTF gas front month falling below the fuel-switching price for average plant efficiencies.
In theory, this means that a gas-fired power plant with an efficiency of 50% (the European average) is now more profitable than the coal equivalent (39%).
The last time we saw this was 𝟭𝟳 𝗝𝘂𝗻𝗲 𝟮𝟬𝟮𝟭.
Elevated gas prices in the interim have boosted the fuel costs for gas plant operators relative to their coal equivalents, particularly during 2022.
Falling gas hub prices, coupled with recent strength in the carbon market which saw the EUA Dec ’23 settle above €100/tCO2e for the first time on 21 February, has altered this dynamic.
Since the start of the year, we have seen the most efficient gas plants competing with the least efficient coal plants. The recent changes show a growing opportunity for lower efficiency gas plants moving forward.
Is this the confirmation we needed to see a significant uptick in CCGT activity year on year?
Or will this level act as a temporary price floor for gas prices?
Keen to know your thoughts!
Source: Christopher RENE (LinkedIn)
