German power, NCG correlation up as gas moves to margin
Strong renewable energy output and a lack of coal-to-gas fuel switching pushed German gas-fired power generation to the lowest level for April since at least 2011, with the trend of under-pressure power sector gas burn likely to prevail for at least the remainder of this quarter.
Outright gas-fired power generation is on track to hover around the previous decade-low reached in summer 2015, but gas burn is expected to again play a role at the margin of the German merit order next month.
Average output from renewable sources, including biomass, hydro, wind and solar, reached 0.74 TWh/day in April to meet a 48.5pc share of domestic power consumption — the highest share for any month on record — preliminary data from German research institute Fraunhofer ISE show. Thermal power generation at 0.68 TWh/day which was at the lowest level for any month since at least 2011, and within the conventional power generation mix, gas burn was under particular pressure. Higher plant availability compared with April 2017 increased the share of nuclear supply in the thermal generation mix by around 4.6 percentage points year on year to 23.2pc and of lignite-fired generation by 2.8 percentage points to 47pc. The share of power sector coal burn in the thermal generation mix was largely unchanged on the year at 22.4pc in April, despite a 16pc decline in outright production to just 0.17 TWh/day, the lowest level for the month of April in at least seven years. Power sector gas burn also fell to a seven-year low for April and by 53pc on the year to 0.5 TWh/day, with its share in the thermal power generation mix falling by 6.5 percentage points compared with the same month last year to 7.3pc.
Low gas stocks at the start of April have boosted injection demand across much of northwest Europe, pulling NCG near-curve prices above the fuel-switching price — the range at which gas-fired power plants would competitive with German coal-fired units at various efficiencies. Gas burn last month is likely to have come, by and large, from combined heat and power (CHP) plants running at minimum load to supply industrial process steam, residual heating demand during periods of unseasonably low temperatures for parts of April and hot water. Gas plants coming on line to meet demand as the marginal unit was limited to only a few hours and a few days given the strong penetration of renewable energy in April and because of the disadvantage of gas plants over coal-fired units to free up gas supply to add to storage.
The trend has continued so far this month. Combined renewable energy output has been at an average of 0.74 TWh/day on 1-9 May, so far exceeding the all-time high set in April. Nuclear power generation has been stable so far this month compared with April while lignite generation has slipped just slightly lower, leaving hard coal and gas-fired plants to bear the brunt of the further squeeze on thermal generation. Coal-fired output fell to a daily average of 0.14 TWh/day while power sector gas burn was at 0.04 TWh/day. The latter matched the decade low first recorded in June 2015 and again in August that year when day-ahead clean spark spreads were deeply negative. Several factors which have pressured coal-fired power generation and gas burn in particular in April and so far this May remain at play for the remainder of this quarter, but prevailing forward prices suggests that commercially driven gas-fired generation, while remaining under sustained pressure compared with summer 2016-17, could at least tick higher compared with recent weeks.
Rising hydro power generation has been a key driver of the record-high renewable power generation recorded in April and so far this month. German daily average hydro output, including from plants in Austria feeding into the German grid, stood at 0.11 TWh/day on 1-9 May, a new all-time high. Above-average snow fall in the 2017-18 winter combined with the onset of snowmelt pulled hydro output to a fresh high, and this is highlighted in available Swiss snowpack data. Snow depth near Montana, in the Swiss canton of Valais, stood at 418cm on 31 March, compared with a long-term average for that time of year of 279cm, according to data from the SFL institute for snow and avalanche research show. As of yesterday, snow depth stood at 291cm as snowmelt narrowed the surplus to the seasonal norm to 61cm . Snowmelt so far has encouraged stronger run-of-river generation which is uncontrolled beyond shutting damns to avoid flooding and so is unresponsive to power market price signals. While the above-average snow pack in Switzerland and in other parts of central west Europe is likely to continue to support hydro power generation throughout at least the remainder of this quarter, generation could fall back behind the high levels recorded in April and May next month with less water being fed into rivers as snowpack falls.
On the demand side, power consumption is typically higher month on month in June as several public holidays in Germany and in neighbouring countries weighs on demand in May.
Combined nuclear plant availability in Germany, France, Switzerland and Belgium is scheduled to average 63.2GW in June compared with the 59.6GW scheduled for May and above actual plant availability of 55.5GW in June 2017. But in Germany, nuclear plant availability is scheduled to be steady month on month at 7.6GW in June compared with 7.4GW this month and below actual nuclear plant availability of 9.4GW in June last year. On days with lower wind and solar power generation and in light of the potentially lower run-of-river hydro and higher power consumption levels in June compared with recent weeks, the German marginal unit could then be more often pushed to gas burning territory. The correlation between the German May base-load contract and movements for corresponding API 2 coal swaps and NCG gas hub prices was negative throughout April. But there is a strong correlation between the June base-load power contract and corresponding API2 coal and NCG prices on 1-9 May as the market prices in higher probability of Germany being pushed to coal and gas burn at the margin next month. Competition for the role of as the marginal plant could be steep between old coal and efficient gas units in June on low renewable days, as the NCG gas hub contract held above the fuel-switch price at which a 59pc-efficient gas unit can compete with a 38pc-efficient coal plant. And modern gas units tend to be more flexible than ageing coal units which could provide an opportunity for gas-fired plant operators to optimise their plants in the intra-day market.
The latter was highlighted in continuous intra-day trading yesterday. The German-Austrian intra-day product delivering at 08:00 CEST (06:00 GMT) trades as high as €399.80/MWh and expired at a weighted average of €97.24/MWh compared with a day-ahead settlement at €42.86/MWh for that hour. Gas-fired power generation was 2.4GW in hour 8, compared with planned output of 2.1GW. An unplanned outage at the 726MW Wilhelmshaven 1 coal plant contributed to a tighter than expected power system yesterday morning. Coal-fired output was 5.3GW in hour 8, compared with planned production of 6.6GW as highly efficient gas rather than medium-efficient coal plant ramped up to smooth out the system deficit.
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Mitsui makes delayed exit from Paiton power project
Mitsui makes delayed exit from Paiton power project
Tokyo, 1 May (Argus) — Japanese trading house Mitsui completed on 30 April the ¥109bn ($690mn) sale of its stake in Indonesia's 2,045MW Paiton coal-fired power plant in east Java following multiple delays. Mitsui originally tried to complete its exit by the end of March 2022 . It said the procedures with Paiton's offtaker Indonesian state-owned power firm Persero took more time than expected without providing further details. Japanese thermal power producer Jera withdrew from Paiton by selling its 14pc share in 2021. Mitsui sold its 45.515pc share in Paiton Energy, as well as a 45.515pc stake in Netherlands-based subsidiary Minejesa Capital and a 65pc stake in Singapore-based IPM Asia that are related companies of the Paiton project. Mistui sold the stakes to RH International (RHIS), which is a Singapore-based subsidiary of Thai power producer Ratch, and Indonesian power company Medco Daya Abadi Lestari's subsidiary Medco Daya Energi Sentosa (MDES). Paiton Energy is now owned by RHIS, MDES and Qatar-based company Nebras Power. Mitsui did not disclose their ownership ratios. Paiton consists of the 615MW No.7, 615MW No.8 and the 815MW No.3 units, which sell electricity to Persero through an unspecified long-term contract. Mitsui now holds 9.6GW of power capacity assets globally, with 8pc being coal-fired projects. The exit from Paiton cut its coal-fired ratio by 8 percentage points, while raising its renewable ratio by 3 percentage points to 32pc. Growing global pressure against coal-fired power generation likely prompted Mitsui to exit Paiton. Energy ministers from G7 countries this week pledged to accelerate "efforts towards the phase-out of unabated coal power generation". By Nanami Oki Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Italian April power imports drop on NTC restrictions
Italian April power imports drop on NTC restrictions
London, 30 April (Argus) — Italian net electricity imports fell to their lowest in more than a year in April owing to significant constraints in net transfer capacity (NTC) from France to Italy, supporting an increase in domestic generation. Net imports averaged 4.7GW in April, down from 7GW in March and well below 6.7GW in the same month last year, according to data from Italian transmission system operator Terna. This was the country's tightest net importing position for any month since August. Italian imports from France saw the largest year-on-year decline, averaging 1.5GW compared with 2.7GW in April last year. This was Italy's lowest net imports since August 2022. Imports from Switzerland also fell on the year, declining by 500MW to 2.3GW, the lowest since August last year ( see chart ). The steep drop in imports to Italy's north zone is largely a result of significant reduction in the available NTC on France's eastern borders. Since early March, strong commercial exports through all of France's eastern borders, combined with low availability of the French power grid because of planned and unplanned outages, have led to "an extremely tense situation" for the French transmission system, the country's grid operator RTE has said. These factors have led to soaring physical flows and security issues on some interconnectors on the France-Switzerland and France-Italy borders. RTE on 5 March reduced the day-ahead NTC on the France-Italy border from a scheduled 4.5GW to 1.6GW, but the measure proved "insufficient to mitigate operational issues", RTE said. The overloads, although close to the France-Italy border, were induced by high commercial exports on all of France's eastern borders, including those with Belgium and Germany. RTE consequently applied additional safety measures to guarantee the operational security of the grid, such as lowering the NTC on the France-Switzerland border from 2.5GW to 2GW. Export constraints have resulted in French prices remaining at a significant discount to Italy, with the French spot index delivering at an average discount of €59.13/MWh in April compared with €35.37/MWh in March and €28.61/MWh in April last year. And falling Italian imports have driven a 2GW year-on-year increase in domestic generation to 24.6GW in April, while Italian power demand has remained virtually stable at 28.8GW. Minimum temperatures in Milan averaged 6.6°C on 1-30 April, up from 5.3°C in March and above 5.7°C in April last year. RTE is expecting some NTC curtailments until the beginning of May and from August to mid-October, it said. By Timothy Santonastaso Italian imports by country GW Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
G7 countries put timeframe on 'unabated' coal phase-out
G7 countries put timeframe on 'unabated' coal phase-out
London, 30 April (Argus) — G7 countries today committed to phasing out "unabated coal power generation" by 2035 — putting a timeframe on a coal phase-out for the first time. The communique, from a meeting of G7 climate, energy and environment ministers in Turin, northern Italy, represents "an historic agreement" on coal, Canadian environment minister Steven Guilbeault said. Although most G7 nations have set a deadline for phasing out coal-fired power, the agreement marks a step forward for Japan in particular, which had previously not made the commitment, and is a "milestone moment", senior policy advisor at think-tank E3G Katrine Petersen said. The G7 countries are Italy — this year's host — Canada, France, Germany, Japan, the UK and the US. The EU is a non-enumerated member. But the pledge contains a caveat in its reference to "unabated" coal-fired power — suggesting that abatement technologies such as carbon capture and storage could justify its use, while some of the wording around a deadline is less clear. The communique sets a timeframe of "the first half of [the] 2030s or in a timeline consistent with keeping a limit of 1.5°C temperature rise within reach, in line with countries' net-zero pathways". OECD countries should end coal use by 2030 and the rest of the world by 2040, in order to align with the global warming limit of 1.5°C above pre-industrial levels set out in the Paris Agreement, according to research institute Climate Analytics. The countries welcomed the outcomes of the UN Cop 28 climate summit , pledging to "accelerate the phase out of unabated fossil fuels so as to achieve net zero in energy systems by 2050". It backed the Cop 28 goal to triple renewable energy capacity by 2030 and added support for a global target for energy storage in the power sector of 1.5TW by 2030. The group committed to submit climate plans — known as nationally determined contributions (NDCs) — with "the highest possible ambition" from late this year or in early 2025. And it also called on the IEA to "provide recommendations" next year on how to implement a transition away from fossil fuels. The G7 also reiterated its commitment to a "fully or predominantly decarbonised power sector by 2035" — first made in May 2022 and highlighted roles for carbon management, carbon markets, hydrogen and biofuels. Simon Stiell, head of UN climate body the UNFCCC, urged the G7 and G20 countries to lead on climate action, in a recent speech . The group noted in today's outcome that "further actions from all countries, especially major economies, are required". The communique broadly reaffirmed existing positions on climate finance, although any concrete steps are not likely to be taken ahead of Cop 29 in November. The group underlined its pledge to end "inefficient fossil fuel subsidies" by 2025 or earlier, but added a new promise to "promote a common definition" of the term, which is likely to increase countries' accountability. The group will report on its progress towards ending those subsidies next year, it added. Fostering energy security The communique placed a strong focus on the need for "diverse, resilient, and responsible energy technology supply chains, including manufacturing and critical minerals". It noted the important of "guarding against possible weaponisation of economic dependencies on critical minerals and critical raw materials" — many of which are mined and processed outside the G7 group. Energy security held sway on the group's take on natural gas. It reiterated its stance that gas investments "can be appropriate… if implemented in a manner consistent with our climate objectives" and noted that increased LNG deliveries could play a key role. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Japan’s Chugoku delays Shimane No.2 reactor restart
Japan’s Chugoku delays Shimane No.2 reactor restart
Tokyo, 30 April (Argus) — Japanese utility Chugoku Electric Power has postponed the restart of its 820MW Shimane No.2 nuclear reactor in western Japan's Shimane prefecture from August to December, as reinforcement works are taking longer than expected. The reinforcement works are taking longer, as the utility is also conducting facility inspections to prepare to reactivate the reactor after an extended closure since January 2012 for stricter nuclear safety inspections, said Chugoku on 30 April. Chugoku previously planned to complete the reinforcement works in May , but has now postponed this to October. The utility had aimed to begin normal operations at the reactor in September , but has now delayed it to January 2025. Chugoku had previously modified the restart schedule multiple times . The return of the Shimane No.2 reactor could have helped Chugoku reduce its reliance on thermal generation fuels including oil, LNG and coal, especially during the peak power demand season of summer. Chugoku is currently building the 1,373MW No.3 reactor at Shimane, aiming to complete its safety-enhanced construction sometime during April-September 2025. The company has filed an application with the Nuclear Regulation Authority for a safety screening of the No.3 reactor. Its 460MW Shimane No.1 reactor was scrapped in April 2015. By Nanami Oki Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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