Modern German lignite plant margins halve from 2024

Market: Electricity
11/03/21

Rising EU emissions trading system (ETS) prices have almost halved the profitability of modern lignite-fired power plants in Germany beyond 2024, taking almost half of the country's lignite fleet into loss-making territory based on current forward prices.

Clean lignite spreads for a unit with an efficiency of 43pc — the highest for this technology in the country — for 2024 were at €5.96/MWh yesterday, based on assumed lignite costs of €2.85/MWh and Argus' over-the-counter (OTC) assessments of German power and EU ETS allowances. Germany has around 3.6GW of lignite-fired capacity with this efficiency — units built in the 2010s.

Generating margins for the most efficient lignite-fired plants have fallen by 48pc since 15 December, when Argus began assessing 2024 EU ETS allowances, as EU ETS price have risen sharply. EU ETS December 2024 was assessed at €33.25/t CO2 equivalent (CO2e) on 15 December and closed yesterday's session at €43.06/t CO2e. EU ETS allowances account for around 92.3pc of breakeven costs for a lignite-fired plant with this efficiency. Clean lignite spreads for the same efficiency and 2025 base load closed yesterday at €4.46/MWh, down by 60pc since the beginning of this year.

Almost half of the country's lignite fleet will be unprofitable to run from 2024, based on current forward generating margins. Clean lignite spreads for a unit with an efficiency of 36pc have averaged minus €2.06/MWh this month. Generating margins for units with this efficiency have been negative since 2 February.

German lignite-fired capacity currently stands at around 16.87GW, of which around 8.22GW has an efficiency of 36pc or lower — units built in the 1980s or before. Around 49pc of all lignite-fired units with a capacity of 100MW or higher are priced out for base load.

Around 2.52GW of capacity is earmarked to close from end of this year until end of 2022. This will leave German lignite-fired capacity at 15GW from 2023 and around 5.7GW from 2025-29. This means that around 35pc of the operational capacity in 2024 would be running at a loss. The remaining 8.2GW of lignite-fired capacity will close in 2033-38.

Positive in the short term

Looking closer in, generating margins for these 36pc-efficient lignite-fired units remain positive although they have also been under pressure, nearing negative territory in recent sessions. Clean lignite spreads narrowed to €0.54/MWh yesterday, down by almost 90pc since the beginning of the year.

Around 900MW of lignite-fired capacity is earmarked to close at the end of this year.

German lignite-fired generation this quarter has been higher year on year supported by lower than average wind and periods of colder than average weather. Stronger increases in power prices than in the EU ETS have supported margins for lignite-fired plants. Working day-ahead lignite spreads for a 36pc-efficient plant have averaged €4.09/MWh since January, compared with minus €3.21/MWh during the same period last year, based on Argus assessments.

But the outlook for these units for the spring period is not expected to be profitable for base load, as demand for heating declines and solar power generation increases. Current power prices suggest that only a unit with an efficiency of 42pc or higher is priced in for base load during the April-June period, although with narrow margins.

By Jacqueline Echevarria

Clean lignite spreads 42% €/MWh

Clean lignite spreads 36% €/MWh

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News

08/04/25

US mid-Atlantic gas prices may rise on cold

New York, 8 April (Argus) — Spot natural gas prices across the mid-Atlantic this week may rise on an increase in heating demand resulting from colder weather. The mid-Atlantic in the week ending on 12 April was forecast to have 148 population-weighted heating degree days (HDDs), up by 37pc from a week earlier and 12pc more than the seasonal norm, according to the US National Weather Service (NWS). Below-average temperatures were expected across the northeast US, eastern midcontinent and southeastern Canada through 11 April, according to the private forecaster Commodity Weather Group. Normal seasonal weather was expected in all those regions from 12-16 April, the forecaster noted. The May price at Transco zone 6 in New York was $3/mmBtu, and the 12-month strip was $4.54/mmBtu, according to Argus forward curves. Mid-Atlantic spot prices last week rose on an increase in weather-related demand, despite the 31 March official end to the winter heating season. The Transco zone 6 New York index in the week ended on 4 April averaged $3.37/mmBtu, up by 9pc from a week earlier and 5pc higher than the April bid week price. The Tetco M-3 index over the period averaged $3.32/mmBtu, up by 10pc from a week earlier and 3pc higher than the April bid week price. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Find out more

News

Colombia's renewables grow, but gap looms

07/04/25

News

07/04/25

Colombia's renewables grow, but gap looms

Bogota, 7 April (Argus) — Development of non-conventional renewable (NCRE) generation has picked up in Colombia, but the pace is still not fast enough to cover a projected generation shortage by 2027-2028. Colombia will likely reach 2.55GW in installed NCRE such as solar and wind — excluding large hydropower — by the end of 2025, up from 1.88GW at the end of 2024, Colombian renewable association SER director Alexandra Hernandez told Argus at the Colombia Genera conference held last week in Cartagena. About 670MW from 19 medium and large NCRE plants worth $500mn will likely come online in 2025, Hernandez noted. Of that total, 30MW in two projects came online in January and the balance of 640MW is under construction, according to Hernandez. The plants will reduce emissions by 1.1mn metric tonnes (t) CO2/yr compared with conventional generation. For 2026, 419MW in NCRE could come online. NCRE will comprise a 12pc share of Colombia's generation capacity in 2025, up from 10pc in 2024. But Colombia will fail to meet its target of 6GW in NCRE by August 2026, when the administration of president Gustavo Petro ends, former minister of mines and energy Amylkar Acosta said. Colombia will likely will end 2026 with 3GW, Hernandez noted. This comes despite Petro's support for renewable energy and ambitions to phase out hydrocarbons use. Much of the NCRE development is focused on the dry, windswept department of La Guajira that borders Venezuela and juts into the Caribbean. US firm AES' will start building the first 259MW phase of its 1.1GW Jemeiwaa Ka'I wind complex there later this year, AES's general manager Federico Echavarria said at the Colombia Genera conference. "Our biggest bet is La Guajira," Echavarria said. Last year, Colombia's environmental regulator Anla approved a transmission line connecting 648MW of planned wind capacity in the La Guajira area to the national grid. The 500kV Casa Electrica-Colectora transmission line and substation will connect with Grupo de Energia de Bogota's 500kV Colectora transmission line. Colectora has begun construction and should come online in 2026, a delay from its original 2022 start date. La Guajira has Colombia's greatest renewable power potential, including 21GW of wind power potential, according to state planning agency UPME. But delays to key transmission projects and lengthy community consultations impeded development. Italian power company Enel suspended indefinitely construction of a 205MW wind farm in the Windpeschi region, but state-controlled oil company Ecopetrol is seeking authorization to buy it. Projects advancing in other departments include the 200MW Orquidea solar project in the Caribbean province of Bolivar, which recently earned an environmental permit that clears the way for construction. Running out of time But this new generation capacity will not cover an expected supply shortfall. Colombia is forecast to have a gap of around 2,000MW by 2027-2028 assuming baseline consumption, and 3,000MW-6,000MW if demand rises further, several electricity associations have said. Renewables could help fill this gap, as the construction is fairly quick once permits are secured, the renewables group SER said. But 47pc of renewable power companies were unable to complete their planned investments in 2024, with permitting delays among the top reason, the group found in a member survey. Permits from the government's mining and planning unit UPME takes nine months, compared with the two months stipulated by the law. Regional entities take twice as long to issue a permit than the legal limit. The government will push to do more, energy and mines minister Edwin Palma said in Cartagena. "We are convinced and committed to ensuring that expansion projects are carried out," he said. "We will work with the ministry of the interior to expedite licenses." By Diana Delgado Colombia's power generation mix % Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

News

EU Parliament approves delay to climate policies

03/04/25

News

03/04/25

EU Parliament approves delay to climate policies

London, 3 April (Argus) — The European Parliament today voted to postpone the application of the corporate sustainability due diligence directive (CSDDD) and the corporate sustainability reporting directive (CSRD), with final approval now required from the European Council. The European Parliament has backed some of the key proposals from the European Commission's omnibus package submitted in February , which aims to delay the start of due diligence and sustainability reporting requirements by one and two years, respectively. The CSDDD would require large firms to adopt plans to mitigate their climate impact, keeping global temperatures within 1.5°C of pre-industrial levels, as per the Paris climate agreement. Under the new proposals, member states have until July 2027 to transpose the rules into national legislation, with the first wave of affected business required to be compliant from 2028. The CSRD came into force at the beginning of 2024, introducing mandatory climate and energy disclosures for some businesses. The use of certificates such as guarantees of origin and renewable power purchase agreements are the only ways recognised in the original text to document use of renewable energy. February's omnibus package sought to delay the start of reporting for companies with more than 250 employees as well as small and medium-sized enterprises by two years to 2028 and 2029, respectively. The next step in the legislative process requires formal approval from the European Council, which already indicated an agreement in an initial position adopted on 26 March. In addition to delaying the application dates, the commission is also seeking to amend the content and scope of both directives. Notably, for sustainability reporting, the changes would see 80pc of companies falling outside the initial scope . By Giulio Bajona Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

News

Australia’s gas leaders hit out at market intervention

02/04/25

News

02/04/25

Australia’s gas leaders hit out at market intervention

Sydney, 2 April (Argus) — Senior figures in Australia's upstream gas sector have hit out at plans for intervention in the heavily regulated industry, as debate continues on how to best address domestic supply shortfalls later this decade. The federal Coalition in March announced National Gas Plan including a 50-100 PJ/yr (1.34bn-2.68bn m³/yr) domestic reservation system aimed at forcing the three LNG exporters based in Queensland's Gladstone to direct more supply to the eastern states' market. But oversupplying the market to drive down prices would destroy the viability of smaller gas projects, Australian independent Beach Energy's chief executive Brett Woods said at a conference in Sydney on 1 April. The domestic-focused firm, which will export some LNG volumes via its Waitsia project in 2025, warns that such a move by the Peter Dutton-led opposition would reduce export incomes while harming Australia's international reputation. The volumes impacted by the policy could reach around 900,000-1.8mn t/yr. Expropriation of developed reserves is equivalent to breaking contracts with LNG buyers and with the foreign and local investors that the country needs for ongoing economic security, Woods said on 1 April. Domestic gas reservation systems put in place by the state governments of Western Australia (WA) and Queensland, designed to keep local markets well supplied, were "clearly supportable", Woods said, but only future supply should be subject to the regulations. LNG terminals, which represent about 70pc of eastern Australia's total gas consumption and shipped 24mn t in 2024 , should not be blamed for the failure of governments to expedite new supply and plan for Australia's gas future, head of Shell Australia Cecile Wake said in response to the Coalition's proposal. Shell's QGC business supplied 15pc of its volumes to the local grid, with the remainder shipped from its 8.5mn t/yr Queensland Curtis LNG project, Wake added. Canberra has moved to promote gas use as a transition fuel to firm renewable energy in line with its 2030 emissions reduction targets, but progress has been slow as reforming laws appear to be hampering development . The state governments, particularly in gas-poor Victoria and New South Wales (NSW), must recognise the need for locally-produced supply and streamline the approvals processes, especially environmental permits, executives said. But despite pleas for an end to years of interventionist policy — including the governing Labor party's measures to cap the price of domestic gas at A$12/GJ , Australia's fractured political environment and rising cost of living has sparked largely populist responses from its leaders. A so-called "hung" parliament is likely to result from the 3 May poll , with a variety of mainly left-leaning independents representing an anti-fossil fuel agenda expected to control the balance of power in Australia's parliament. LNG debate sharpens Debate on the causes of southern Australia's gas deficit has persisted, and the ironic outcome of underinvestment in gas supply could be LNG re-imports from Gladstone to NSW, Victoria and South Australia, making fracked coal-bed methane — liquefied in Queensland and regasified — a likely higher-emissions alternative to pipeline supply. Several developers are readying for this possibility , which is considered inevitable without action to increase supply in Victoria or NSW, increase winter storages or raise north-south pipeline capacity. Australian pipeline operator APA appears to have the most to lose out of the active firms in the gas sector. APA chief executive Adam Watson this week criticised plans for imports, because relying on LNG will set the price of domestic gas at a detrimental level, raise emissions and decrease reliability of supply, Watson said. The firm is planning to increase its eastern pipeline capacity by 25pc to bring new supplies from the Bass, Surat and Beetaloo basins to market. But investment certainty is needed or Australia will risk needing to subsidise coal-fired power for longer if sufficient gas is unavailable to back up wind and solar generators with peaking power, Watson said. By Tom Major Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

News

LNG stocks at Japan’s power utilities rise

02/04/25

News

02/04/25

LNG stocks at Japan’s power utilities rise

Osaka, 2 April (Argus) — LNG inventories at Japan's main power utilities increased during the week to 30 March, as warmer weather reduced electricity demand for heating purposes and limited gas-fired generation. The utilities held 2.24mn t of LNG on 30 March, up by 22pc from a week earlier, according to a weekly survey by the trade and industry ministry Meti. This was higher by 51pc compared with 1.48mn t at the end of March 2024 and up by 10pc against 2.03mn t — the average end-March stocks over 2020-24. A seasonal rise in temperatures weighed on power demand, which fell by 12pc on the week to 87GW across 24-30 March, according to the Organisation for Cross-regional Co-ordination of Transmission Operators (Occto). This resulted in a 24pc fall in gas-fired output to an average of 24GW during the period, the Occto data showed. Coal- and oil-fed generation also fell by 14pc to 23GW and by 21pc to 409MW respectively in the same period. The lower demand has created extra supplies to be sold on the wholesale market. This has weighed on day-ahead prices on the Japan Electric Power Exchange (Jepx) and worsened generation economics for the country's thermal power plants. Margins at a 58pc-efficient gas-fired unit running on oil-priced LNG supplies fell into negative territory, with the spark spread averaging at a loss of -¥2.28/kWh ($15.22/MWh) across 24-30 March, compared with the previous week's profit of ¥0.84/kWh. The 58pc spark spread using spot LNG widened the deficit, with the margin averaging at a loss of -¥3.79/kWh against the previous week's -¥0.80/kWh, based on the ANEA — the Argus assessment for spot LNG deliveries to northeast Asia. Coal remained competitive in Japan's merit order. But the dark spread of a 40pc-efficient coal-fired unit also fell by 64pc on the week to an average of ¥1.63/kWh over 24-30 March, based on Argus' spot coal and freight assessments. By Motoko Hasegawa Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more