European gas-fired power generation to go down amid expansion of renewables

Oil&Gas Materials 7 October 2021 14:57 (UTC +04:00)
European gas-fired power generation to go down amid expansion of renewables

BAKU, Azerbaijan, Oct.7

By Leman Zeynalova – Trend:

European gas demand is expected to increase by 4.5 percent y-o-y in 2021, with most of the demand growth concentrated in H1, while high gas prices during the heating season are expected to weigh both on gas burn in the power sector and gas demand in industry, Trend reports with reference to the International Energy Agency (IEA).

Following the strong recovery in 2021, European gas consumption is expected to decline by 2 percent y-o-y in 2022, according to IEA’s forecasts.

“Assuming average weather conditions in Q1 and Q2, distribution network-related demand in 2022 is expected to decline due to lower space heating requirements. The IEA’s latest Electricity Market Report foresees a decline of 2 percent in European gas-fired power generation in 2022, due to the rapid expansion of renewables and despite the continued closure of coal-fired power plants. Gas demand in industry is forecast to continue to recover close to its pre-2020 levels,” reads the latest report released by IEA.

European gas consumption grew by close to 10 percent y-o-y during Q1-3 2021. This growth was concentrated in H1 2021, when gas demand grew by a notable 14 percent y-o-y. Strong demand was supported by a prolonged heating season, higher gas burn in the power sector and gradual recovery in economic activity. Growth was particularly strong during Q2, with European demand soaring by close to 25 percent –its highest y-o-y growth on record. In contrast, European gas consumption dropped by close to 4 percent y-o-y during Q3, primarily due to lower gas demand in the power sector. Strong recovery in nuclear output (up by 18 percent y-o-y) reduced the call on thermal power generation.

The strong increase in gas prices, soaring to a quarterly record of USD 16/MBtu on TTF, eroded the cost-competitive position of gas-fired power plants against coal-based generation during Q3. This resulted in substantial gas-to-coal switching in the European power sector despite the strong gains in carbon prices: while coal-based generation rose by close to 15 percent, gas-fired power output plummeted by over 12 percent y-o-y during Q3. In contrast with the rest of Europe, gas-fired power generation rose by 60 percent in Turkey compared to last year, amid a strong recovery in electricity demand and plummeting hydro output (down 33 percent y-o-y).


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