German Datteln 4 coal unit to launch amid tight spreads

  • Market: Electricity
  • 26/05/20

German utility Uniper's Datteln 4 coal-fired power plant will begin commercial operations on 30 May, but tight clean dark spreads suggest it may not run at full capacity in the near term.

The 1.1GW, 45pc-efficient plant is carrying out tests and has fed power into the grid on some days since 8 May. Datteln 4 has generated a total of 237GWh of electricity since then, the highest level for any coal-fired unit so far this month, data from Fraunhofer ISE show.

The unit's launch comes at a time when generation economics and fundamentals have pushed coal-fired generation to the margin of the German merit order. Production from coal-fired plants has been 2.11GW so far this month, the lowest for the period since at least 2011.

Next working day-ahead clean dark spreads for a 45pc-efficient unit have averaged minus €3.53/MWh so far this month, based on Argus assessments of API 2 coal swaps and EU ETS allowances, putting these units below 49pc-efficient gas-fired and 43pc-efficient lignite-fired units in the German day-ahead market merit order.

In the intra-day market, a 45pc-efficient coal-fired unit has on average been profitable to run during hours 4, 13 and 20 this month, based on Argus assessments.

Clean dark spreads for the same unit and June peak load have averaged minus €0.07/MWh this month.

The outlook for German coal-fired generation could strengthen during the summer, when wind and run-of-river generation typically decline. Third-quarter peak-load clean dark spreads for a 45pc-efficient unit have averaged €6.15/MWh so far this month, compared with €1.29/MWh for base-load hours.

But these units remain below the lowest-efficiency gas and highest-efficiency lignite-fired plants in the merit order for next quarter.

Datteln 4's start-up is controversial, as Germany plans to phase out its coal and lignite-fired plants by 2038. Under the country's draft phase-out law, Datteln 4 is scheduled to close between 2035 and 2038. Uniper previously confirmed that the curtailed duration of commissioning means the unit will not cover its investment costs.

Earlier this year, the firm said it will close its remaining coal-fired units between 2022 and 2025 — except Datteln 4 — subject to approval of the final draft of the coal phase-out law, which is being debated in parliament.

German clean dark spreads for a 45pc plant €/MWh

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