BAKU, Azerbaijan, Oct.21
By Leman Zeynalova – Trend:
The rising European prices reflecting the tight global supply demand balance, might have been expected to lead to a loss of competitiveness for gas in the power market, Trend reports with reference to the Oxford Institute of Energy Studies (OIES).
The coal price (ARA – Amsterdam, Rotterdam, and Antwerp) is adjusted for the relative efficiency of gas power plants to coal power plants and the relatively higher carbon costs of coal.
“In early 2019, as gas prices declined, we saw them fall well below the adjusted coal price, and this continued in 2020 as the impact of Covid-19 put significant downward pressure on prices. As a result, there was significant coal to gas switching in 2019 and in 2020 even some lignite to gas switching in Germany. The sharp rise in TTF prices last winter which has continued during the summer, might have been expected to lead to a significant loss of competitiveness of gas relative to coal,” reads the OIES report.
However, coal prices have also risen sharply, although by less than the TTF price, but the EU ETS price has also risen to provide a further boost to the carbon-adjusted coal price, according to the report.
“Gas, therefore, maintained its competitive position until very recently, providing some support to gas demand in Europe. The recent rise in prices, however, has pushed gas prices well above the adjusted coal price, encouraging a switch to coal. According to the forward curves this is expected to be maintained through the middle of 2022 before gas and adjusted coal prices come together again. Depending on the weather this winter gas could lose market share in the power sector to coal at these relative prices.”
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