The profitability of running gas-fired power plants in the Netherlands dipped during December as a turn-off in demand owing to mild conditions and Christmas celebrations increased the pressure on plant owners, an analysis of Platts pricing data shows.
For a 50%-efficient power plant, the clean day-ahead spark spread -- a measure of gas plant profitability once fuel and carbon costs are taken into account -- averaged minus Eur0.53/MWh during December, turning negative for the first time in three months.
Plant economics edged lower on the year, slipping from minus Eur0.32/MWh during December.
Day-ahead OTC-traded baseload power averaged Eur33.78/MWh during December, down 12% on the month and 26% lower on the year, Platts data shows.
The month-on-month downturn in power prices meant plant owners were unable to exploit the continuing slide in natural gas prices traded on the TTF hub, down 8% to average Eur15.77/MWh during December.
Over the fourth quarter the spark spread averaged Eur1.25/MWh, up from minus Eur0.78/MWh during the previous quarter, while the average in the second half of the year of Eur0.23/MWh was notably higher than the Q1 average of minus Eur2.11/MWh.
Plant margins were negative across 2015, averaging minus Eur0.92/MWh for the year, just 1 euro cent below the 2014 average.
MARGINS SET TO WORSEN INTO NEW YEAR
An analysis of curve pricing data paints a grim picture for plant operators during 2016, as the renewed availability of close to 3 GW of Belgian nuclear capacity brings about the end of a healthy export market for Dutch producers.
The exemption of the Netherlands' new wave of high efficiency coal-fired units from the Eur14.40/mt coal tax applies a further bearish lean to power prices and is set to improve the attractiveness of coal burn compared to gas.
The year-ahead spark spread in December averaged minus Eur2.42/MWh, while Q1 and front-month margins averaged minus Eur1.41/MWh and minus Eur0.74/MWh, respectively.
On the last trading day of the year, the year-ahead TTF gas contract expired at Eur14.85/MWh, Eur5.59/MWh above the coal switching price that applied on that day, according to Platts calculations.
The coal-switching price is the gas price that would make the running costs of a hypothetical generator the same using either coal- or gas-fired plants.
