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“For the first time in years CCGT is cheap to run”
Plummeting wholesale gas prices haven’t been bad for everyone. Sure, there have been warnings from the big six that annual profits may shrink, and warnings from consumer groups that their retail tariffs should too. But one unexpected winner to emerge from the rubble of the recent price crash is, oddly enough, the environment.
For the first time in years gas prices are so low that generators would rather turn on a cleaner CCGT unit than opt for the now ubiquitous coal-burn. CCGT has been at the pricier end of the generation mix for so long that there’s almost something a little extravagant about the idea of CCGT happily running through the night. But that is exactly what’s happening.
Government data for 2012 and 2013 showed the reign of Old King Coal at around 40 per cent of the UK’s generation mix, while gas-fired power lagged behind at around 25 per cent.
But for this summer, the reverse is true. And with conventional wisdom suggesting that gas generation emits half the CO2 of coal-fired power, the switch is bound to have a positive impact on the UK’s annual emissions count.
Not that you’ll see an impact in the carbon market, though. Traders noted a small hit to UK demand for offset allowances, but ultimately this is not expected to be a long-term trend.
Climate activists would do well to take a deep breath now – the change of pace may last through Q3 but the winter chill should bring a return to trend.
If a Russian gas supply cut doesn’t get there sooner.
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