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Power plants with CO2 capture will set price on supply side

Oil&Gas Materials 16 September 2021 11:29 (UTC +04:00)
Power plants with CO2 capture will set price on supply side

BAKU, Azerbaijan, Sept.16

By Leman Zeynalova – Trend:

In a long-term decarbonised world, power plants with synthetic fuels or with CO2 capture and storage will increasingly set the price on the supply side, Trend quoted Martin Koller, Head of Energy Economics at Swiss Axpo, as saying.

“The demand side, with its electrolysers and storage systems, will gain price-setting power. Fossil fuel-driven power plants without CO2 capture will become less relevant. Of course, it cannot be excluded that in the longer term new technologies with completely different cost characteristics will enter the market. The short-term electricity price determines the effective use of (pump) storage power plants and gas-fired power plants, while the long-term electricity price is important for securing long-term expected production from nuclear energy and hydro,” he said.

Koller noted that CO2 price increases electricity prices. “Despite the higher electricity price, a higher CO2 price also indirectly improves conditions for green hydrogen, which is produced from electricity. This green hydrogen can be used as hydrogen or as another synthetic molecule, as a substitute for various fossil fuels or can be used in industrial processes. A high CO2 price is one of the required conditions if there is to be a Europe-wide or worldwide market for green hydrogen. Our new strategy lays the foundations for us to play a decisive role in a world with numerous renewables and green hydrogen.”

He went on to add that it is mainly power plants on the supply side with positive variable costs, such as gas and coal-fired power plants that set the price.

ЭIf coal, gas or CO2 prices rise, price-setting power plants have higher variable production costs, which means that electricity prices rise as well. By comparison, wind, PV and hydropower plants barely have any variable costs at all, and for nuclear power plants they are very low, which makes them ‘price takers’,” said Koller.

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