Europe undergoes modest revival in gas plant construction as further coal closures loom

With minimal fanfare, Europe is undergoing a modest revival in natural gas-fired power plant development.

Data compiled by S&P Global Commodity Insights' analysts and newsletter Power in Europe show close to 10 GW of combined and open cycle gas generation in construction or commissioning across Germany, Greece, Italy, Ireland, Poland, and the UK.

This is up on prepandemic levels, reflecting a partial response to coal, lignite, and nuclear closures in recent years, and a further 15 GW of closures announced for 2023.

In Greece, where lignite generation is a shadow of its former self, Mytilineos' 826-MW Agios Nikolaos combined cycle gas turbine plant is about to enter operation, while construction has begun on the 840-MW Alexandroupolis CCGT being developed by PPC, DEPA and Copelouzos Group.

In Italy, the startup of Edison CCGTs at Presenzano (810 MW) and Marghera (817 MW) are scheduled for April and June. EP Produzione's 850-MW Tavazzano gas plant in heading for March 2024 completion, while construction of Enel's Fusina CCGT (840-MW) began in late 2022.

All these projects are to benefit from capacity mechanism support, as do large in-construction gas plants in Poland at Dolna Odra (2 x 700 MW), Ostroleka (745 MW), Grudziadz (563 MW).

In Germany, Steag's 600-MW Herne-6 CCGT started commercial operations last autumn, while chemicals maker Evonik and automaker Volkswagen completed coal-to-gas switch projects at their Marl and Wolfsburg production sites.

Meanwhile four 300-MW OCGT plants built to help stabilize networks in southern Germany are nearing completion.

Looking ahead, German Energy Minister Robert Habeck is to present a new power plant strategy by the summer with a first auction for hydrogen-ready power plants in December 2023. Grid regulator BNetzA has recommended auctions for 9 GW of hydrogen capacity.

Excluding these capacities, BNetzA sees a 21-GW deficit in dispatchable generation by 2031, with existing support for cogeneration and biomass only partly covering the shortfall.

In the UK, SSE's 893-MW Keadby 2 CCGT in North Lincolnshire entered commercial operations mid-March, while Keadby 3 (a 910-MW CCGT at the same site with carbon capture being developed by SSE Thermal and Equinor) received panning consent in December.

More recently a high clearing price in Feb. 21's T-4 2026-27 Capacity Market Auction ensured 15-year new-build agreements for two 776-MW CCGT units at EPH's Eggborough site in North Yorkshire (as well a slew of new-build contracts for 510-MW of reciprocating engines).

Similar or higher prices in future (the auction cleared at GBP63/kW/year, double the previous T-4 record set last year for 2025-26 delivery) would be supportive of future awards for the UK's long tail of approved CCGTs -- S&P Global data showing around 16 GW of approved capacity across 15 sites.

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Thermal closures

These developments need to be set against widespread dispatchable plant closures and the switch to investments in intermittent renewables.

In its latest European Electricity Long-Term Forecast, S&P Global analysts see West European gas, coal, and lignite capacity falling to 199 GW in 2025 and 133 GW in 2030, from 215 GW in 2020.

Over the same period nuclear capacity is seen falling to 79 GW in 2025 and 76 GW in 2030, from 95 GW in 2020.

At the same time West European wind and solar capacities are set to rise to 487 GW in 2025 and 818 GW in 2030, from 292 GW in 2020.

"We see limited incremental growth in unabated gas capacity to 2025, with that growth mostly due to projects supported by capacity payments" and where investment decisions predated the energy crisis, the November 2022 forecast report said.

A 5-GW net gain in gas plant capacity over the next three years would be followed by a 20 GW fall in the subsequent three years, "and by 2050 there is just 15 GW left on the system," with output negligible, the report said.

NEW PLANT TRACKER SUMMARY, MARCH 2023

Source: S&P Global Commodity Insights

NEW PLANT TRACKER COUNTRY OVERVIEW, MARCH 2023 (MW)

Source: S&P Global Commodity Insights

RETIREMENTS, MOTHBALLINGS TO END-2023 (MW)

Contact: Susanne.Ilse@spglobal.com

Source: S&P Global Commodity Insights