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German fuel switch needs CO2 at EUR 35/t – analyst


29 Aug 2018 13:43

29 Aug 2018 13:43

(Montel) A CO2 price of EUR 35/t would lead to a significant switch from dirty coal-fired generation to more efficient gas-fired output, consultants Enervis said on Wednesday.

“Our results show that a certificate price of EUR 35/t and higher would quickly lead to a fundamental shift in the power generation structures and noticeably lower CO2 emissions from power plants,” Enervis analyst Mirko Schlossarczyk said.

Current gas and coal prices being equal, a CO2 price of EUR 35/t would see a typical German gas-fired unit with 55% efficiency push hard coal-fired power plants with an efficiency below 39% out of the so-called merit order, which determines the pricing levels for power.

At EUR 40/t, coal plants below 42% efficiency would be displaced, Enervis said

Given a reference scenario of current CO2 prices at 21-22 EUR/t, this would lower hard coal and lignite-fired power generation by some 30% annually, and cut power plant emissions by 10%, it added.

The two coal types produced around 240 TWh of power in 2017 and emitted some 290m tonnes of CO2, according to figures from think tank AGEB and the government environment agency UBA.

EUR 40/t unlikely
CO2 prices have risen 180% since the start of the year to just shy of EUR 22/ in anticipation of a tighter supply situation from next year, when the Market Stability Reserve in the EU ETS will remove almost 400m allowances from the market.

Still, it was unlikely that carbon prices would rise to EUR 40/t in the short to medium term, as the overall system would remain oversupplied until the end of the next decade, according to Schlossarczyk.

“What we do not see in the market is scarcity. And as long as there is no scarcity, the price won’t rise to above EUR 30/t,” he told Montel. 

Enervis does not forecast emissions prices, but uses data from other sources, such as the latest World Energy Outlook from the International Energy Agency, which pegged CO2 at EUR 30/t in 2030.

Last week Carbon Tracker said it expected carbon to reach EUR 35/t by next year.

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