European energy prices have been surging in 2021. TTF (in green) has been locked in a race to the top against coal switching range (CSR, in grey) & lignite switching ranges (LSR, in brown), in order to balance a tight gas market where European gas storage levels have dropped below the 5 year lows.
Until mid-May, rocketing carbon prices acted to pull both CSR and LSR higher (a 1 €/t move in the EUA price causes around a 0.45 €/MWh move in the LSR compared to a 0.25 €/MWh for the CSR). While this translated to higher gas hub prices, TTF still languished near the bottom of the switching ranges, failing to price off significant volumes of demand for generation.
Since that time, carbon (and therefore LSR) has been rangebound, though coal prices have extended gains to above 130$/t, driving coal generation to be more expensive than lignite generation. TTF however has accelerated to finally end up at the top of both switching ranges by July, at 200% of the spot price seen back in March.