High German gas-fired electricity output to persist throughout August

LONDON (ICIS)–Gas-fired generation is likely to retain its newfound prominence in the German power mix in August with high temperatures forecast across Germany and neighbouring France to support demand.

The surge in gas generation can be attributed partly to an increase in demand for cooling appliances such as air conditioning.

Temperatures are expected to hit 6.5°C higher than average in week 33 although turning slightly milder in week 34, according to forecasts from weather services provider MetDesk.

Recent hot weather has led to an increase in power demand from gas, with German CCGTs generating almost 6.5TWh of electricity in July this year, Fraunhofer ISE data showed.

This is 3.6TWh higher than the 2015-19 average.

REDUCED FRENCH NUCLEAR

Lower French nuclear availability could reduce the amount of electricity exported to neighbouring Germany, in turn supporting German gas-for-power demand.

French utility EDF announced that the country’s nuclear availability in August could be affected by above-average temperatures, with the recent warm conditions leading to cooling water restrictions.

During the rest of August, availability is currently set to remain stable at an average of 35.7GW, which stands 5.7GW lower than the 2015-2019 average, according to ICIS tracking of RTE data.

Germany remains a key power importer from France, importing 14.8TWh in 2019, and therefore is sensitive to supply constraints in the neighbouring French market.

FUEL SWITCHING

The fall in profitability has caused hard coal and lignite’s share in the power mix to plummet, with combined coal generation dropping by 9% in July this year compared with in July 2019.

High levels of fuel switching due to the German coal phase out will also continue to support gas-fired generation in the power mix in August.

Despite the recent surge in gas prices, ICIS Analytics clean spark and clean dark spreads demonstrate that gas plants of a 50% efficiency were significantly more profitable than lignite and coal assets of 39% efficiency for German power delivery in 2021 throughout the second quarter.

This is likely to push coal-fired generation even further out of the power mix.