Corrects unit in graph
German coal-fired power plant operators expect to burn more coal this year than last, according to responses to an Argus survey. Utilities share optimism of an improved supply-side outlook by mid-2022, although the outlook has been muddied by unfolding events in Ukraine.
EnBW, Enercity, GKM, Hamburger Energiewerke, Steag, SWB, SWM, Trianel, Uniper, Vattenfall and Volkswagen were among the recipients of the survey but not all provided a response. Average daily output in 2021 from coal-fired power plant units operated by these companies jumped by 55pc on the year to 4.4GW and the upward trend has continued so far in 2022 (see chart).
Total coal-fired generation in Germany is on track to exceed last year's level should the current year-to-date growth rate continue for the rest of the year. Daily average coal output from 1 January-22 February 2022 was 5.8GW, up by 30.6pc compared to the full-year 2021 daily average, data from Fraunhofer ISE show.
Sufficient stocks at power plants
Power plant coal stock levels are not currently threatening plant operations, despite tight conditions in the Amsterdam-Rotterdam-Antwerp (ARA) market, respondents to the survey said. Participants were reluctant to share stockpile information at power plants given its confidential nature.
Firm coal burn driven by high power demand and gas-coal fuel-switching dynamics alongside limited coal export growth into northwest Europe has driven coal inventories to record-low levels not only at the ARA hub but also at German power plants. One utility said it experienced record low coal stock levels at a power plant in December but that the situation has improved considerably since. Inland logistical issues in Germany stemming from low Rhine river levels may have contributed to this.
Despite the record-low coal stocks at ARA ports, German utilities surveyed by Argus seem to be comfortable with current stock levels at power plants. Utilities said that current coal stock levels are not posing a risk to supply or having an impact on operations.
The comments come despite disruption to Russian coal supply to northwest Europe over the winter months, stemming from railing issues and other factors.
Several plant operators said their current stock levels correspond with usual inventory levels for the time of year. February and March marked the low period for ARA port coal stocks in 2020 and 2021.
In terms of days of use, coal stocks at sites can currently cover coal burn for one to three months, based on responses to the Argus survey. But days of use at one utility are as low as 14 days, assuming the plant runs at a full load. Germany's daily coal plant load factor based on available capacity has ranged from 17pc-88pc and averaged 56pc so far in 2022.
Coal-gas dynamics
The prevailing forward curve suggests fuel-switching should support European coal burn through to 2023 and all available coal generation capacity should run ahead of gas.
Coal's share in the combined coal and gas mix was 51pc between 1 January and 22 February, up from 42pc a year earlier, data from Fraunhofer ISE shows.
One utility is planning to increase coal burn by 29pc on the year to hit a record level, with the unit in question set to increase its annual load factor by 15 percentage points to 74pc.
Another operator with a plan to convert its coal-fired unit to gas expects this to be completed in 2022 and is planning to shut down the coal unit by mid-2023, implying that coal burn could continue for another six months. Another participant expects a higher load factor year on year but for its total coal burn to be capped by planned plant shutdowns. Other respondents to the survey did not want to disclose their coal burn planning.
Supply-side questions
In addition to expecting higher coal demand, participants in the survey expect tight coal supply conditions to ease later in the year. This should enable the increased coal burn.
Coal supply from several major suppliers has been compromised in early 2022, although the resumption of exports from Indonesia and the easing of winter supply risks associated with heavy rain in Indonesia and Australia could improve matters into the second quarter.
But there are numerous risks to this supply outlook, with the escalation in the Ukraine crisis the elephant in the room.
Russia has already been struggling with rail capacity issues for several months. In the event of a further disruption of Russian exports to Europe, Germany would be hardest hit.
And it would appear challenging for utilities to meet their plans for higher coal-fired generation were there a prolonged stoppage to Russian deliveries.
