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EU wind, solar peak at 123 GW helping to ease record spot power prices

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EU wind, solar peak at 123 GW helping to ease record spot power prices

Highlights

Rare surge in wind, YTD trails 2020 by over 10%

Gas, coal generation costs exceed Eur100/MWh

Aug. thermal gap at record-low: Platts Analytics

Wind and solar power generation across EU markets peaked at 123 GW Aug. 17 amid a spell in wind that helped ease record spot power prices, grid operator data aggregated by WindEurope show.

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The brief surge in wind reduced demand for gas and coal generation with average generation costs for such plant now exceeding Eur100/MWh ($118/MWh), S&P Global Platts data show.

Generation cost for a 50% efficient gas plant rose above Eur117/MWh both for September and Q4 2021, boosting forward power contracts as fuel and carbon costs hit record highs.

Excluding carbon, gas-fired generation costs across the Northwest Europe region were still around Eur96/MWh as TTF gas prices soared to Eur47/MWh, Platts data show.

Spot power prices eased with August to date in Germany averaging around Eur75/MWh after July's Eur81/MWh average was the highest since 2008, exchange data show.

September however settled at Eur97.62/MWh Aug. 17 on EEX with most European winter power contracts now above Eur100/MWh.

According to Platts Analytics, below average wind load factors have contributed to the strength in power prices and the wider fuel and carbon complex for most of 2021 so far.

High wind dispatch alone however would fail to bring prices in line with recent years, it said in a monthly report Aug. 12 testing a high wind scenario for winter.

For the 10 markets modeled, Platts Analytics' base case scenario pegs average Q4 wind generation flat on year at 47 GW.

Wind generation in Europe's five biggest markets was down 12% on year for the January to July period at a 32 GW average, according to Platts Renewables Tracker.

Solar production was up only 1% on year averaging 15.9 GW across the five markets so far this year despite strong capacity growth leading to an all-time high in June.

In addition, improved nuclear, robust hydro and easing pressure on demand in a year-on-year comparison have led to Europe's thermal gap (gas and coal) shrinking to a record-low this August, according to Platts Analytics.

Europe's biggest power market Germany was on track for record-low combined gas/hard-coal generation averaging only 4.4 GW so far this August compared to a 6.4 GW average in April 2020, the previous low, grid data show.

Overall Germany was set for the biggest on year increase in CO2 emissions since 1990 amid a rebound for lignite and strong gas demand in the first half of 2021, topping the energy mix for the first time ahead of oil, while the share of renewables fell due to low wind speeds.