In Europe, coal now offers both lower prices for electricity consumers and higher profits for utilities


The costs of coal fired power generation in Europe have been artificially inflated for some time now by the imposition of various forms of carbon taxes. These taxes and penalties – which are quite arbitrary – serve political and electoral goals and generally pander to the alarmist view of climate change. The electricity consumer has taken the hit.

Bloomberg reports:

Coal Era Beckons for Europe as Carbon Giveaway Finishes

European utilities are poised to add more coal-fired power capacity than natural gas in the next four years, boosting emissions just as the era of free carbon permits ends.

Power producers from EON AG to RWE AG (RWE) will open six times more coal-burning plants than gas-fed units by 2015, UBS AG said in a Sept. 5 research note. Profits at coal-fired power stations may more than double by then, according to a Goldman Sachs Group Inc. report published on Sept. 13.

The new stations, replacing atomic and aging fossil fuel- based plants, will boost demand for emission permits because coal-fired generators need twice as many credits as gas users under climate protection rules. The price of UN credits may rebound 73 percent by the end of next year from an all-time low on Sept. 18, according to the Euro Carbon Macro Fund in Luxembourg, which manages about $32 million.

“The economics for coal are near the best we’ve seen in five years,” Laurent Segalen, a director at ECMF, said yesterday in an interview from London. Buying UN credits for 2013, after they plunged almost 80 percent in the past year, is “an amazing bargain,” he said. ……

…… Utilities will add as much as 10,600 megawatts of new coal plants in seven central European countries in the next four years, compared with 1,600 megawatts of new natural-gas capacity, Patrick Hummel, a UBS analyst in Zurich, said in the report. Generators will retire 3,400 megawatts of stations burning coal in the same period, he said. A thousand megawatts can supply power to about 2 million European homes. ……..


The next-year German power price, the regional benchmark, has fallen 47 percent since exceeding 90 euros a megawatt-hour in July 2008, according to broker prices compiled by Bloomberg. It closed at 48.11 euros yesterday.

Coal plants can boost profit 58 percent by using UN offsets instead of EU permits for as much as 20 percent their compliance needs, according to a Bloomberg clean-dark spread calculator, which takes the cost of the fuel, power and carbon into account. German profits based on prices for next year will reach 15.69 euros a megawatt-hour with a CER, compared with 9.96 euros using an EU permit. Stations burning natural gas make a loss under both scenarios, the calculations show.

Northwest Europe’s coal-fed capacity will rise 4.6 percent next year to 68,000 megawatts and 3 percent to the same level for gas-fired power stations, Deborah Wilkens, an analyst at Goldman Sachs in London, said in the report last week. Capacity will drop after 2013 for both fuels and margins at coal-fired plants may rise as high as 26 euros by 2015, she said. ……….


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