EC proposals for an EU-wide phase-out of coal by 2030 – analysts

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A series of proposals released on Wednesday would see high carbon prices that would make coal-fired power plants economically unsustainable by the end of this decade, sources agreed.

According to Matthias Buck, director of European energy policy at Agora Energiewende, rising CO2 costs could lead to “a phasing out of coal on a European scale by 2030.

Carbon prices in the range of 40 to 60 euros / t “push coal out of the system,” said Richard Howard, research director at analytics firm Aurora.

Coal is becoming “horribly unprofitable” in countries like Germany and Poland, he said.

“Pure economics” would suggest a rapid phase-out of coal in Germany in particular, faster than the government had expected, he added.

Germany aims to phase out coal from power generation by the end of 2038, while some EU members like Denmark, France, Greece, Hungary, Italy, countries -Bas and Spain will get out of coal this decade.

There would also be faster development of renewables, possibly above the 40% target set by the EC, said Florian Rothenberg, analyst for commodities consultancy Icis.

The carbon market “demands a sharp reduction in emissions and renewable energies are one of the cheapest sources of emission reductions available to us,” he added.

Fuel switching
Teresa Rossi, senior analyst for the energy market at French energy broker Omnegy, said rising carbon prices “could allow a switch to gas if the price of gas does not skyrocket”.

If gas does not increase significantly, “we will see a heavy fuel shift,” Rothenberg said, although he warned that there had been a sharp increase in gas prices this year “which was unexpected. “.

There would be a “very short-term” shift from coal to gas with more gas on the market over the next two to three years, another analyst said.

This would decrease in the medium and long term because “the CO2 budget for gas is limited”, he added.

Europe would likely need 15 GW of gas power plants to help meet peak demand during times of low renewable energy production.

Price volatility
“In the short term, we’re seeing very high electricity prices, higher than we’ve seen for some time,” Howard said.

Indeed, electricity prices in Germany hit their highest level in almost 13 years, while the benchmark carbon price hit a record high of nearly 59 EUR / t at the start of the month.

This could continue into 2021 and over the next two years, as the base and capture prices of renewables increased, he added.

There would be a drop in electricity prices in the mid-2020s, he said.

Electricity prices would also become more volatile with an increase in intermittent renewable capacity, analysts agreed.

This would create a “different long-term paradigm” with revenues concentrated in a smaller number of hours with very high prices, Rothenberg said.

Renewable energies would also benefit greatly from rising carbon prices and see a “higher profit margin when coal or gas sets the price,” he added.

The intermittency of renewables would boost demand for energy storage, grid balancing services and more interconnections, analysts said.


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