With lockdowns lifted in most European major economies, electricity demand and wholesale power prices are slowly approaching pre-corona levels. A notable exception is gas prices, which have fallen to unprecedented low levels due to the mild winter and full gasholders.
“This development has created a perfect storm for coal plants,” Mirko Schlossarczyk from the consultancy enervis commented. "The combination of reduced electricity demand, extremely low gas prices and recovering CO2 prices remains a toxic mix."
As a consequence, coal-fired power plants lose out to gas-fired plants on the market, he explained, concluding: "In the end, the corona crisis only accelerated the long-term decline of coal."
Need for better incentives
In Germany, strong renewable power production coinciding with low demand underlined the need for more flexibility in April and most of May. In the absence of sufficient levels of energy storage, power prices turned negative, because it was not possible or profitable for thermal plants to turn off, and because a lot of renewables that are in the system currently have no incentive to turn down even when power prices turn negative.
To avoid such scenarios in the future, it is vital to increase both the flexibility of dispatchable power plants, and give renewables incentive to curtail production when power prices turn negative.
Grid stability and power supply security was not threatened, as grid operators have been quick to learn how to cope with high volumes of renewable energy in the system. Basically, German TSOs they tend to handle it through re-dispatch and feed-in management, i.e. telling renewables in the north to turn down and thermal plants in the south to turn up.
Calling for further grid expansions, Hanns Koenig from consultancy Aurora Energy Research pointed said: “TSOs likely would have had a harder job at managing the system if demand had not been reduced due to Covid-2019, because re-dispatch is normally highest in high renewables, high load situations.”
By 2030, Aurora expects only moderate increases in power demand but looking further ahead Mr Koenig sees stronger demand growth, “simply because the cheapest way of decarbonising a lot of industry sectors will be to electrify.”