German front-month coal and gas-fired power generation margins have fallen deeper into negative territory as bearish power fundamentals for May have kept outright power price gains at bay despite sharp gains for carbon, coal and gas.
Coal-fired clean dark spreads at record lows
Gas-fired clean sparks below minus Eur10/MWh at 2015 low
Power fundamentals bearish despite coal, gas, carbon gains
S&P Global Platts data showed the German month-ahead clean dark spread (CDS 45% efficiency) for a modern coal plant fell to minus Eur1.81/MWh at Tuesday's close -- a record low and down more than Eur10/MWh this year.
However, even the oldest coal-fired power plants in Germany would be still ahead of modern gas-fired units in the merit order when needed next month as strong outright prices have pushed gas-fired margins even lower, to minus Eur10.77/MWh -- their lowest since August 2015.
Gas-fired margins have recovered over recent years and were generally in positive territory since last summer, but rising gas prices on the back of cold weather and very low gas storage levels have seen the CSS plunge to a 32-month low, the data showed.
Outright power prices for May have been weak amid healthy supply fundamentals and especially strong hydro power expectations following above average snow in the Alps.
German baseload power for May has been mainly trading below Eur32/MWh this month, the lowest for a front-month contract since August, and barely above levels a year ago.
Generating fuel prices, by contrast, have increased sharply over the past year with coal into Europe for May delivery still around $80/mt, while European gas prices have been boosted by late winter cold spells pushing European gas storage levels near record lows.
EUA carbon allowances, the final cog in the spread calculations, have more than doubled since last summer, reaching six-year-highs and up by over 30% during March alone to trade well above Eur13/mt.
In the long term, that should favor less-carbon intensive gas over coal plants with front-year margins between the oldest coal units and modern gas narrowing again and German baseload power for 2019 delivery reaching a record high.
For May, however, both gas and coal units were expected to ramp down sharply amid strong hydro supply, falling power demand and growing solar generation after midday solar peaks already reached 30 GW last week, TSO aggregated data by Fraunhofer ISE showed.
Output from German hard-coal fired power plants in March rose 18% year on year, with both February and March the best months for German coal in over a year, while gas-fired output fell 33%, the TSO data showed.
The trend will likely stretch into the summer but, long term, coal output was expected to fall as pressure on the oldest coal plants to close increased amid the carbon price rally.
Last year, coal plant closures saw German coal output fall 16% compared with 2016.
Both hard-coal and gas, however, will continue to get squeezed by rising renewables with wind Germany's single biggest source of power this winter and the country's installed wind and solar capacity now above 100 GW.
