The phase-out of coal-fired generation across Europe could slow in 2021 amid more favourable market conditions than last year, according to the Oxford Institute for Energy Studies (OIES).
The OIES' quarterly gas review predicts a "short-lived" and "marginal" recovery this year owing to firmer electricity demand and higher gas prices, making coal burn more competitive.
But the report says that less-efficient coal-fired plants will still struggle to compete with gas for most of the year, while a recovery in nuclear output and increasing renewable generation will limit any growth in coal-burn.
Longer-term, the report says phase-out of coal-fired generation in Europe could accelerate because of unfavourable market conditions in 2020.
It also says countries such as France and Portugal could follow the lead of Austria and Sweden, which both phased-out coal completely last year, by closing their remaining plants in 2021. Meanwhile, Spain and Germany could accelerate their own exits from the fuel this year, with half of the former's coal plants filing for permission to shut because of poor market conditions.
Germany plans to shut around 5.5GW of hard coal-fired plants and about 1.2GW of lignite-fired facilities by the end of 2021, under its Coal Exit Law, passed last year. The country held its first coal capacity closure auction last year, whereby plant owners can bid to be compensated in return for retiring their facilities, and will hold a further three in 2021. Chancellor Angela Merkel's 16-year term will come to an end this year, which creates the possibility of a more urgent coal exit strategy under the new administration than the country's current 2038 target.
German clean dark spreads (CDS) for a 46pc-efficiency coal-fired plant running in the second and third quarters of 2021 have averaged €2/MWh and €4.60/MWh so far this month, respectively, holding margins over clean spark spreads (CSS) for a 55pc-efficiency gas-fired plant of €1/MWh and €0.30/MWh respectively.
This compares with CDS for a 46pc-efficiency coal-fired plant in the second and third quarters of 2020 of €1.80/MWh and €4.10/MWh, respectively, on average in January last year, suggesting slightly wider margins for coal burn this year.
In addition, CSS for 55pc-efficiency gas-fired plants last year held advantages of €3.20/MWh and €3.50/MWh over CDS for the second and third quarters, respectively. This means coal-fired plants have regained an advantage over gas in the merit order, which could limit or reverse coal-gas fuel switching this summer.