European forward power prices continue to rally as carbon jumps, fuels rise

London (Platts)--14 Sep 2017 903 am EDT/1303 GMT

European forward power prices continued to rally Thursday as EUA carbon allowances jumped again, extending their gains so far this month to 30%, with generating fuels coal and gas also moving higher and coal into Europe trading at a fresh 42-month-high.

  • German year-ahead at Eur36.80/MWh, highest since February 2014
  • French year-ahead above ARENH price at Eur42.85/MWh
  • Carbon up 30% so far this September, at 20-month-high

German year-ahead power, the benchmark contract for European power, was heard as high as Eur36.80/MWh, the highest for such a contract since February 2014 and up 75% since the year-ahead contract hit a 12-year-low last February, S&P Global Platts data showed.

So far this month, the The Calendar 2018 contract is up 11%.

With the German power mix still dominated by coal, strength in global coal markets has driven prices higher, with European front-year coal just below $84/mt Thursday amid tight supply and strong demand fundamentals in the Asian market.

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EU carbon allowance prices rallied as high as Eur7.60/mt Thursday, up from Wednesday's close of Eur7.10/mt, as a breakthrough was achieved in closed-door talks to overhaul the 31-nation carbon market for the period after 2020.

EUAs have risen some 30% since the start of September, to their highest since the start of 2016.

French year-ahead baseload power was heard at Eur42.85/MWh, its highest since spikes last winter amid unprecedented nuclear outages with the contract now trading above the ARENH price mechanism (Eur42/MWh) where nuclear operator EDF has to sell part of its nuclear production to large domestic consumers.

French winter power prices also continued to rise despite EDF saying new anomalies discovered in document files for nuclear components manufactured by the Le Creusot foundry will have no impact on the safe operation of its reactors after the regulator requested document checks for all 58 French reactors. The investigation was set to run until the end of next year.

European gas prices also continued to move higher, but lagged the gains for coal, carbon and power. The front-year TTF gas contract was up 10 euro cent at Eur17.375/MWh, its highest level since March.

The trend has lifted generation margins for gas-fired power plants to their highest level in over five years with Germany's most efficient CCGT plants now on the brink of profitability -- purely based on fuel costs -- for the first time since 2011.

The year-ahead baseload clean-spark spread for a 50% efficient gas plant in Germany reached minus Eur1.17/MWh Wednesday, the highest since the end of 2011 with the front-year spread in negative territory since the start of 2012, Platts data showed.

--Andreas Franke,
--Edited by Dan Lalor,

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