Germany is currently examining reactivating its 1.9GW lignite supply reserve over the 2023-24 heating period, economic affairs and climate action ministry BMWK told Argus.
A renewed activation of the supply reserve is “conceivable” according to BMWK, and would be possible if certain prerequisites are met. This is currently being examined, it said.
Utility RWE, which operates the 295MW Niederaussem Block E, 299MW Niederaussem Block F and 292MW Neurath C units, told Argus it would be technically feasible to return these units to the market if requested by the government. The decommissioning of the three units is planned for the end of the first quarter of 2024.
The return of other units in the grid reserve, particularly coal-fired units, is permitted until the end of March next year under Germany’s replacement power plant availability act, providing the country’s gas alert level remains unchanged or steps up. Gas stocks rose above 90pc last week, and as of Monday morning were only a few percentage points below the country’s 95pc storage target for 1 November.
But gas storage sites could be empty by the end of January if the coming winter is as cold as 2009-10, according to modelling by German gas storage operators’ association Ines, while in a winter with near-average temperatures, storage sites would reach a minimum of 21pc full by the end of March. A mild winter could mean that storage sites never go below 70pc.
Gas-fired generating margins for the winter quarters remain at a disadvantage to coal-fired operating margins, with clean-dark spreads for 40pc-efficient plants for the front quarter standing at an advantage of €2.77/MWh to clean-spark spreads for 55pc-efficient plants on Monday. But the advantage has tightened this quarter to an average of €2.88/MWh from €9.27/MWh in the second quarter, with gas moving ahead of coal in the merit order several days in late July and early August for the first time in almost two months. And operating margins for both have declined, with average dark spreads down by €13.29/MWh on the quarter to €8/MWh, and spark spreads down by €6.90/MWh to €5.12/MWh.
Despite lower thermal generating margins, Germany has trended at a discount to its neighbouring French, Belgian, Dutch, Austrian and Swiss markets for the front quarter, switching from a premium to the Netherlands throughout July and early August. Wind output is typically higher in the winter quarters in Germany, averaging 18.1GW compared with 9.8GW in the summer quarters over the past five years. And the production index for energy-intensive industries — which shows the development of price-adjusted production value — has declined sharply since mid-2022, standing at 82.4 points in June, down by more than 10 points on the year. Correspondingly, German power demand has been declining this year, falling below 49GW for the first time since May 2020 so far in August, and industrial gas demand has been down compared with the average in 2018-21 every week so far this year. If lower demand continues in Germany, higher wind output over winter could push up exports and return Germany to a net exporter.