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Coal to overtake natural gas in UK power supply mix next week as cold returns

London (Platts)--16 Mar 2018 1223 pm EDT/1623 GMT


Coal is expected to overtake gas as the dominant fuel in the UK power supply mix next week as cooler temperatures return over the weekend and day-ahead clean dark spreads for Monday rise, traders said.


  • Traders nervous about low gas storage
  • Coal generation nearly 2 GW below gas on Friday
  • Wind drops next week, supply markets tight

The weekend contract was heard traded at GBP59.50/MWh earlier Friday, a sharp rise of GBP5.50 over the last two consecutive trading sessions.

National Grid data showed coal-fired generation at 8.5 GW at 11-11:30 am London time, only 2 GW below gas-fired generation.

That compares with coal-fired generation of around 6-6.5 GW seen earlier this week and last week.

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"Switching from gas to coal has already happened," one trader said. "Gas has come off from this morning's highs and power was very well offered. There is wind around this weekend, but it falls through Monday and is low on Tuesday."

Gas is one of the most dominant fuels in the UK power supply generation mix, but low wind and low medium-range storage for gas has caused nervousness about supply next week, traders said.

The NBP day-ahead contract was seen trading at 66 pence/therm Friday morning, moving above the weekend contract, which was dealt at 63 p/th, while working-days-next-week traded at 64 p/th.

"The NBP weekend contract gave up some of the previous session's gains in early Friday trade as concerns over the expected fall in temperatures eased back," a trader said. "The UK gas system was long Friday morning, allowing for gas to be injected back into storage."

The UK power day-ahead rose steeply by GBP9 to GBP63.50/MWh and the peakload counterpart was at GBP72/MWh, a steep rise of GBP14 day on day.

"I would say the day-ahead clean dark spreads are at GBP14/MWh at the moment for Monday. The dark spread for Monday is higher than it has been for Wednesday to Friday," a UK power trader said. "So I would expected more coal running on Monday then we have seen in the last few days, but he have low wind too. The day-ahead clean spark spreads are at GBP4/MWh."

The CDS refers the profitability of power produced at a 35%-efficient coal-fired power plant, after taking into account the cost of coal and emissions, and 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. S&P Global Platts does not publish day-ahead CSS or CDS.

--Shubhlakshmi Shukla, shubhlakshmi.shukla@spglobal.com
--Gary Hornby, gary.hornby@spglobal.com
--Edited by Jonathan Fox, jonathan.fox@spglobal.com




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