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THERMAL TRACKER: European gas, coal squeezed by nuclear gains in November

European natural gas and coal-fired power generation continued to fall in November in a year on year comparison, with 2023 on track to be the lowest gas output year since 2018, while coal output could be the lowest on record in recent times, system data show.

Gas-fired power generation across Europe’s five biggest power markets in November fell 19% year on year, while coal plunged 31%.

Declines for gas were led by Spain, France, Spain, Great Britain and Italy, with only German gas registering a small year on year increase.

Nuclear extended its lead in the mix, dominated by the French fleet, with year-to-date nuclear production now up 2% on the year despite reactor closures in Germany.

Germany’s coal and lignite output fell 30% despite Germany swinging back to net exports for the first month since the nuclear exit was completed in April.

Output averaged 14.7 GW, the highest since March with peaks rising above 28 GW during the first winter cold snap late November.

Looking ahead, a decline in EU carbon allowance prices to below Eur70/mt will boost lignite’s profitability, while falling gas prices narrow the switching channel for hard coal and gas units.

Gas-fired generation costs (NWE, 50% efficiency) for December were pegged just below coal (35%) at Eur107.86/MWh on Nov. 30, but above coal for Q1 2024, according to Platts assessments for S&P Global Commodity Insights.

Overall, demand and wind swings play a more important role for daily dispatch of gas and coal units than the very narrow generation margins with only the clean dark spread (Germany, 45%) above zero for December, S&P Global data show.

As a result, power sector emissions in the five key markets are set for a significant year on year decline with gas-fired generation 21% lower compared to the first 11 months of 2022, while coal and lignite output is 31% lower, itself a key driver for falling carbon allowance prices.
Source: Platts

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