Coal news and updates

NATURAL gas-fired power plants accounting for almost 30% of Europe’s capacity are at risk of shutting or being mothballed as utilities opt to burn cheaper coal, according to the International Center for Natural Gas Information.

 

European Union power generators’ demand for gas plunged 33 percent, or 51 billion cubic meters, in the past three years, the organization said today in a report. That equates to a year of French consumption, said Cedigaz, as the center is known. Gas’s share of the EU electricity mix slumped to 19 percent in 2012 from 23.6 percent in 2010, it said.

 

Coal prices dropped 32 percent between the middle of 2011 and the end of last year as surging U.S. shale-gas production reduced the solid fuel’s share of the nation’s power generation, according to Cedigaz. That prompted producers to export coal, creating a glut, it said. Gas prices, mostly linked to oil, rose 42 percent between 2010 and last year, the report showed.

 

“If all gas power plants currently under review by major European utilities are closed, this may lead to the closure of about 50 gigawatts of capacity by 2015-16, or 28 percent of the current capacity,” said Cedigaz, based in Rueil-Malmaison in western Paris. “This capacity is needed to ensure security of supply when wind and sun are not producing.”

 

Profitability measure

 

Gas-fired plants accounting for 14 percent of installed EU capacity were idled, shut or at risk of closing at the end of last year, the report showed. The clean spark spread, a gauge of profitability for gas plants, has been negative since the start of 2012, said Cedigaz. Generation from renewable sources surpassed gas in the EU for the first time in 2012, helping to curb gas-plant operating times, according to the organization.

 

“Faced with low running hours and declining/negative returns, gas power operators have started to mothball or close their loss-making plants,” it said.

 

Coal’s rebound in Europe is unlikely to last, according to Cedigaz. EU air-quality rules might reduce coal-fired capacity by as much as 70 gigawatts, or a third of the current level, it said. One gigawatt, or 1,000 megawatts, is enough to power 2 million European homes. In total, Europe is at risk of losing a third of its gas and coal power capacity, the report showed.

 

“These trends pose a serious challenge for security of supply, as thermal power generation is needed to back up variable renewable energy sources,” Cedigaz said. “The current situation has the potential to unfold into a major structural crisis.”

 

Closing of coal-fired power plants doesn’t imply a larger role for gas in generation, the organization said. Increasing gas use would require reform of the EU’s emissions trading system, more liberalization of trading of the fuel and a new design for electricity markets, it said.

 

Cedigaz has about 100 members including subsidiaries of oil and gas producers Royal Dutch Shell Plc and BP Plc, according to its website.

 

 

Source: Bloomberg