By Shubhlakshmi Shukla
September 13, 2018 - Despite coal being a dirtier fuel in the UK power supply generation mix, it looks set to burn this winter regardless of the UK government's plans to phase out coal-fired plants by 2025, with two more coal power stations in Eggborough and Kilroot set to close down this year.
With EU carbon allowance for December and NBP gas contracts hitting a 10-year high on Monday, coal plants have become more competitive with gas-fired plants, with coal-fired profit margins now converging with gas-fired profit margins.
Data from S&P Global Platts shows, the UK Clean Dark Spread for season-ahead, winter 2018, was at GBP5.40/MWh on Monday, not far off th UK's Clean Spark Spread for winter 2018 at GBP5.43/MWh. The CDS for Winter-2018 rose by GBP0.70/MWh hitting two-year high.
The CDS is the profitability of power produced at a 35%-efficient coal-fired power plant, after taking into account the cost of coal and emissions, while the CSS is the gross margin of power produced at a 50%-efficient gas-fired power plant after accounting for the cost of gas, Carbon Price Support, and emissions.
The CDS for quarter-ahead, Q4 2018 contract hit the fresh highs of 2018 at GBP4.74/MWh on Monday, while CSS counterpart was at GBP5.76/MWh.
The UK power Winter 2018 baseload rose GBP2.60/MWh to GBP76.20/MWh, reaching a fresh 10-year high. Likewise, fourth-quarter baseload rose GBP2.40/MWh to GBP75.60/MWh.
The NBP gas season-ahead contract, Winter-2018, was at 81.75 pence/therm on Monday also reaching new 10-year high, and quarter-ahead was at 80.475 p/th again a fresh decade high.
The gains in the NBP gas on Monday reversed slightly on Tuesday with Winter 2018 at 79.35 p/th.
The EU carbon allowance for December hit highs of Eur25.79/mt on Monday, while it was slightly lower at Eur24.44/mt on Tuesday morning.
On Tuesday, K coal-fired output was 2.6 GW or 8.5% of the total generation mix, compared with gas-fired output at 9 GW or 27.2% of total supply, data from National Grid shows.