DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 2
UK's clean generation spreads illustrate coals long run profitability 2
Belgian's spreads are the least ambiguous longer term 3
Coal has always been the choice fuel in Holland 4
German generation spreads mirror the Dutch gas market 5
Coal prices will drive the demand for CCGT and alternative sources of power generation 6
The EU-ETS will play a fundamental part in determining investment decisions in the power sector 7
Price determination is most efficient at the NBP - Europe's most liquid and efficient gas market 8
The Belgian gas hub illustrates a drop in liquidity over time 9
Contracts at the BEB appear to be thinly traded by volume 10
NW European power curves appear to have peaked for 2008 11
Belgian Month-Ahead contracts slide as prices firm further out 12
French Month-Ahead contracts dip significantly through 2008 13
German Month-Ahead continue to soften through Q4 and Q1. 14
Dutch curves track bullish German power trading sentiment through March 2008 15
UK baseload prices firm at the far-end whilst dipping near the front 16
Gas trades lower through March as forward outlook turns bearish 17
Contracts going out on the NBP softened as UK storage was fully booked for 2008/09 18
TTF Year-Ahead contracts are on the up whilst near-end prices fall 19
Zeebrugge gas prices dip cautiously, mirroring the NBP 20
APPENDIX 21
This brief builds upon Datamonitor's extensive pricing proposition 21
Glossary 22
This brief contains a number of industry standard terms 22
Our analysis builds on other sources to provide greater insight 24
Further Reading 24
Extended Methodology 24
We assess the profitability of fossil fuel plants across northwest Europe 24
Our bespoke services can be tailored to your specific needs 25
Ask the analyst 25
Datamonitor consulting 25
Disclaimer 25
List of Figures
Figure 1: The UK has traditionally enjoyed coal fired power generation trading off the use of gas plant investment 2
Figure 2: Belgian clean dark generation spread has always been favorable for decision makers to justify coal usage 3
Figure 3: Holland's clean dark and spark spreads follow the European trend and the TTF-NBP price dependence 4
Figure 4: The close proximity of the German-Dutch gas markets drive the closeness in generation spreads 5
Figure 5: The price of input generation costs are key in determining future investment within the UK power sector 6
Figure 6: The EU-ETS carbon prices have recovered from last year indicating that generation investment will have a higher risk premium 7
Figure 7: The NBP is the leading gas hub in comparison to its continental counterparts 8
Figure 8: Zeebrugge, Belgium's key gas hub has experienced a fall in liquidity since 2005 9
Figure 9: Germany's major gas trading hub, the BEB, shows a lack of buyer-seller interaction 10
Figure 10: NW European power curves appear to have peaked for 2008 11
Figure 11: Power prices slid at the near end of the curve, Month-Ahead fell for the third month in a row 12
Figure 12: French Month-Ahead power prices continue to fall supported by the key supply fundamental 13
Figure 13: German baseload power prices are bearish and on average fell through February - however, further out prices continue to rise 14
Figure 14: Baseload power forwards firmed and as is the trend, followed German's dominant exchange, the EEX 15
Figure 15: UK baseload prices dipped on the near-side, however, there are underlying concerns going out further into 2008 16
Figure 16: Gas trades lower through March as forward outlook turns bearish 17
Figure 17: Prices at the NBP were characterized by an overall softening, suggesting that another cold winter has been avoided 18
Figure 18: Sentiment on Holland's TTF gas market was buoyed by lower prices at the near end of the curve despite firmness further out 19
Figure 19: Zeebrugge followed the UK given it's geographic and structural similarities to the NBP 20
Figure 20: Energy pricing proposition 21
Figure 21: Generation spread methodology 24