Nordic electricity prices are poised to drop below the operating cost for coal-fired plants from 2015 through 2025, making the stations uneconomical, Finnish portfolio manager Energiakolmio Oy said.
“From 2015 through 2025, the Nordic region will see a growing power glut on the back of new capacity and low consumption growth, pushing the average baseload electricity price below the production cost from coal-fired assets,” Toni Sjoeblom, portfolio manager at the company, said today at a conference in Tampere, Finland.
A negative dark spread, the profit margin for burning coal to generate power, when factoring in fuel and emissions costs, of 2 euros ($2.59) a megawatt-hour, compared with an average profit of 3 euros in the past, indicates that the plants will on average become uneconomical to run, he said.
Traditionally, the front-year Nordic power contract, as well as derivatives further out on the forward curve, have tracked the short-run marginal cost for coal plants “almost 100 percent” while hydrological factors have impacted prices from a shorter-term perspective, he said.
The Nordic region gets half of its average yearly power use from running water through turbines, a fifth from nuclear stations, and 20 percent from fossil, mostly coal-fired stations, which are more expensive to operate.
The 2015 power contract was at 38.45 euros a megawatt-hour at 10:33 a.m. on the Nasdaq OMX Group Inc.’s energy exchange in Oslo, while the 2015 operating cost for coal-fired plants in the Nordic region was 43.86 euros, according to data compiled by Bloomberg.
Energiakolmio specializes in power portfolio management and energy services for business customers. The company manages an aggregate portfolio of 13 terawatt-hours.
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