Coal making a comeback in Germany

2020 saw a perfect storm for the prospects of German coal and lignite generation. The demand impact of the first wave of Covid along with a global gas glut pushing TTF down through the switching ranges saw generation at historic lows (blue line, RHS chart).

2021 has seen different dynamics emerge:

  • demand has rebounded despite the ongoing impacts of Covid
  • TTF has surged from the bottom of the switching ranges in March to the top by the end of June, despite increasing carbon prices intended to penalise higher emitting generation.

The TTF move up through the switching ranges from March to July has seen gas generation decline by over 2GW (green line, LHS chart), in which time combined coal and lignite generation has increased by over 1GW (green line, RHS chart). The two factors combined have seen German coal and lignite generation increase market share in 2021 at a time when other countries are phasing out coal fired power stations, and decarbonisation tops the EU agenda.