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About Commodity Insights
20 Dec 2023 | 12:26 UTC
By Andreas Franke and Maxim Grama
Highlights
15 GW coal, lignite set to close in 2024
Ratcliffe closure to complete UK coal exit
Fuel switch focus shifts to cross-border flows
Some 15 GW of Europe's oldest remaining coal-fired power stations are set to close in 2024, even if lower EU carbon prices could stimulate a slight rebound in output from the bloc's diminishing fleet.
Over 10 GW of 2024 coal closures are in Germany, with the brief reprieve offered by the gas supply crisis last year about to end.
Elsewhere, the UK is set to complete its coal phaseout with the closure of the 2-GW Ratcliffe plant, bringing to an end 140 years of UK coal-fired power generation.
"Coal plant utilization has declined quite significantly [in Europe] reflecting weaker demand through most of 2023, but also lower marginal costs for gas," said Daniel Muir, senior power analyst at S&P Global Commodity Insights.
Some residual strain in the gas market would support coal runtimes in the coming year, before production falls again from 2025, Muir said.
S&P Global analysts forecast 2024 coal and lignite output little changed year on year averaging 17 GW, but set to fall to 15.5 GW in 2025.
Coal and lignite capacity across Europe's main power markets is to fall to 37 GW by end-2024, versus 171 GW for gas and 83 GW nuclear capacity, according to S&P Global data.
Beyond 2024, only 2.5 GW of lignite capacity is scheduled to shut in Germany before 2029 under the coal exit law with the focus on the remaining hard-coal units.
For lignite, there is strong regional opposition in the East to federal ambitions to bring forward lignite closures from the current 2038, while most hard coal operators in west Germany plan to exit coal far earlier.
Operator EnBW wants to phase out coal as early as 2028, although its plan is based on support for new gas and hydrogen infrastructure.
"Clear framework conditions through the power plant strategy are needed promptly," a spokesperson for EnBW told S&P Global, noting up to eight-year development cycles for new power plant in Germany.
"If the planned coal phaseout by the federal government in 2030 is to succeed, the starting signal must be given quickly. Even with an early tender in 2024, time is running out," the spokesperson said.
EnBW is currently undertaking three coal-to-gas conversion projects in its home region of Baden-Wuerttemberg.
RWE, meanwhile, is committed to close its last lignite units by 2030 and have 3 GW of hydrogen-ready gas-fired capacity in place by then, although CEO Markus Krebber admits delays to the power plant strategy are a challenge.
Uniper plans to exit coal in 2029 with the now German state-owned operator having to sell its 1.1-GW Datteln-4 hard coal plant, commissioned in 2020 and allowed to operate until 2038.
Meanwhile, Germany's power plant strategy has been delayed into 2024 amid a budget crisis.
Energy Minister Robert Habeck launched a consultation in August on the framework for tenders for up to 15 GW of hydrogen-ready gas plant, with a first 10 GW to be auctioned by 2026.
This would allow Germany to bring forward the coal exit from 2038 to 2030, the minister said. The plan includes 8.8 GW of new generation using hydrogen from the start.
With the proposed support measures costing up to Eur60 billion ($66 billion) over 15 years, however, opposition within the coalition was evident even before a court ruling effectively froze Berlin's climate fund forcing a review of decarbonization priorities.
Elsewhere and beyond closure of the UK's last coal plant, Italy is expected to begin the final phasing out of its coal capacity in 2024 with 1 GW set to close, most at Enel's Fusina plant (640 MW).
"Italy has reduced its reliance on coal already with coal generation setting record lows after the end of the coal maximization decree. We therefore expect the impact of the coal closures to be low," said Parth Goel, Italian power analyst at S&P Global.
France and the Netherlands together have each three coal units remaining but under annual runtime restrictions, while still-substantial coal/lignite fleets in Poland and the Czech Republic remain under pressure from carbon costs and growing renewables.
Modern Dutch and German coal plant remain profitable for 2024 despite the clean dark spreads (45% efficiency) falling to Eur7.87/MWh on Dec. 18, down from Eur95/MWh at the start of 2023, according to assessments by Platts, part of S&P Global.
By contrast, Germany's clean spark spread for average gas plants (50% efficiency) was minus Eur8.12/MWh compared with plus Eur9.36/MWh for Italy.
British gas plants were also barely profitable next summer, while the Spanish 2024 clean spark spread was deeply negative, according to S&P Global data.
The Platts Coal Switching Indicator for 2024 was pegged at Eur33.65/MWh -- on par with current TTF gas prices -- indicating the level at which a standard gas unit is on par with an older coal unit (40% efficiency).
GERMAN COAL, LIGNITE UNITS SET TO CLOSE IN 2024
Operator | Unit | (MW) | Planned closure |
Lignite Security Reserve | |||
Leag | Jaenschwalde E+F | 1,000 | end-March, 2024 |
RWE | Niederaussem E+F | 600 | end-March, 2024 |
RWE | Neurath C | 300 | end-March, 2024 |
Delayed Lignite Closures | |||
RWE | Neurath D+E | 1,200 | end-March, 2024 |
RWE | Weisweiler F | 321 | end-Dec, 2024 |
Subtotal | 3,400 | ||
Hard-coal reserve or waived closure date units | |||
EPH | Mehrum | 690 | end-April, 2024 |
Uniper | Heyden 4 | 875 | end-April, 2024 |
Steag | Bexbach | 726 | end-April, 2024 |
Steag | Weiher 3 | 656 | end-April, 2024 |
Steag | Bergkamen A | 717 | end-April, 2024 |
Steag | Voelkingen HKV/MKV | 390 | end-April, 2024 |
Uniper | Scholven C | 345 | end-April, 2024 |
Onyx | Farge | 350 | end-April, 2024 |
Evonik | Kraftwerk I | 225 | tba |
VW | HKW West Wolfsburg | 280 | end-March, 2024 |
Steag | Herne 4 | 460 | tba |
EnBW | RDK 7 | 520 | end-May, 2024 |
EnBW | GKM 8 | 435 | end-March, 2024 |
Waerme Hamburg | Wedel | 137 | end-June, 2024 |
Subtotal | 6,800 |
Source: Compiled by S&P Global Commodity Insights