Publications / Hungarian Energy Market Report
REKK Hungarian Energy Market Report 2016 Q2-3.Published: 1 of August, 2016
Trends in European coal to gas fuel switching and a Hungarian case study I Implications of carbon price floor I REKK Renewable Energy Week I Russian gas pricing strategy I The role of energy storage within the electricity system of the future

Table of contents

REKK Quarterly: Trends in European coal to gas fuel switching and a Hungarian case study

Even as electricity demand remains largely stagnant across Europe, the use of natural gas in Europe’s power generation mix is showing prospects for growth, albei not uniformly. In the overall picture, lower gas prices, retiring coal plants, the need to reach environmental goals, and the planned phase out of nuclear energy should in theory help natural gas rebound. Europe’s Large Combustible Plant Directive (LCPD) together with individual policies in Western Europe that aim to phase out coal and nuclear capacity will relieve some of the pressure on CCGT generation. At the same time, Central and South Eastern Europe (CSEE) is comfortable with coal and nuclear retaining prominent roles in the generation mix, with a majority of Europe’s planned coal new build driven by Poland. Britain’s unilateral carbon price floor and some of the lowest NBP prices in the last decade continue to push coal generation down the merit order curve and into the red. Across continental Europe natural gas is also becoming more price competitive with coal as an input, evidenced by trends in clean and dark spark spreads, but the low ETS price has failed create an overwhelming sentiment for industry-wide switching. While depressed gas prices are beginning to create small windows for the profitable use of natural gas in power generation, more aggressive unilateral policy action akin to the British and French carbon floors will need to be taken up in Belgium, the Netherlands and most importantly Germany for gas to make a significant breakthrough.

Implications of carbon price floor: Coal remains below…

In May, French Minister of Ecology, Sustainable Development and Energy Segolene Royal announced her intention to implement a domestic carbon price floor for the French power sector from the beginning of next year. The measure seems to be modelled after the “top-up” carbon tax in the UK. It would ensure that French power producers pay a minimum carbon price of €30/tCO2 – according to currently available information – by charging a tax on fossil fuels used for power generation. The new policy would tax fuels at a level that bridges the difference between the price floor and the carbon price generated by the EU ETS (EUA).

REKK Renewable Energy Week - conference summary and evaluation

On 7-9 June, REKK organised a conference focusing on four current themes within the regulation of renewable based electricity generation: the questions surrounding the achievement of the 2030 EU targets, regional progress with respect to the 2020 renewable targets, the plans on tender procedures to be applied in the near future, and the framework rules pertaining to the new new renewable energy support system (METAR ) soon to be introduced.

Russian gas pricing strategy

Gas prices in Europe dropped dramatically in 2015 and reached time, demand in the European gas market remained stagnant. I historical lows in 2016. At the same n spite of this soft market environment, Russian deliveries to Europe managed to increase. This article provides an overview of the development of Russia’s gas pricing strategy in Europe and projects the pathway that Russia/Gazprom is likely follow.

The role of energy storage within the electricity system ofthe future

Energy storage in Europe is gaining more attention in conjunction with the climate objectives of the European Union. Storage can play an important role in the decarbonisation of the electricity sector by improving the integration of intermittent, weather dependent renewable sources and better aligning production with consumption. Moreover, the total capacity of the electricity system does not have topeak consumption or be adapted to the peak generation of renewables. This allows for savings in the expansion of generating capacities as well as the development of the transport and distribution infrastructure. Storage also has the potential to be commercially viable since it enables the sale of electricity during periods of high demand, and thus high prices.

Author: Ákos Beöthy