OREANDA-NEWS. Firming coal prices and a softening natural gas market continue to threaten the role of the UK's coal-fired power generation units, even for the peak demand periods of the coming winter.

Theoretical generation stacks for peak periods — based on Argus' clean spark and dark spreads, and generation data from last winter — now struggle to find room for even the most efficient coal-fired units.

The clean fourth-quarter base-load spark spread for a gas-fired plant with 55pc efficiency last closed at a £6.30/MWh (€7.48/MWh) advantage against the equivalent dark spread for a coal-fired plant with 38pc efficiency, up from an August average of around £4.40/MWh and just over £2/MWh in July.

The balance has shifted in spreads for the first quarter of 2017. In August, spreads for a 55pc-efficient gas-fired unit were roughly on a par with those for a 40pc-efficient coal-fired plant. But 53pc-efficient gas-fired units nudged ahead of 40pc-efficient coal-fired ones at the start of September, suggesting that as much as 22GW of gas-fired capacity could be ahead of the most efficient coal-fired units in the theoretical merit order.

NBP front-winter gas prices have come under pressure, thanks to some continental gas storage facilities being almost full, the possibility that the UK's Rough gas storage facility will be emptied sooner than usual, and strong Russian gas imports for most of this year.

UK gas production could be higher this winter than in recent years because of the start of the 14mn m³/d Laggan-Tormore complex in February and the expected commissioning of the 7.1mn m³/d Cygnus field in the fourth quarter.

The NBP winter 2016-17 quarterly contracts last closed around 3p/th below the closing average in August, while API 2 winter 2016-17 quarterly coal swaps contracts have risen by around $1.50-2/t from their closing average last month.

Average transmission system demand in peak-load periods of the first quarter of this year was 42.7GW. Spark and dark spreads at yesterday's close suggest that in addition to the gas-fired capacity from units with at least 53pc of efficiency, around 1.2GW coal-fired capacity would be called on at this demand level in the first quarter of 2017.

Base-load power sources such as nuclear, biomass and gas-fired combined heat and power (CHP) units, together with imports from continental Europe, could supply around 14.5GW, last year's output figures and this year's availability schedules indicate. The addition of average wind and hydropower output would then leave demand of just over 24GW.

Available gas-fired capacity with an efficiency of 53pc or more could cover as much as 23GW of this demand, assuming that Ireland's ESB has begun commercial operations at its 880MW, 58pc-efficient Carrington plant, leaving 39.5pc-efficient coal-fired units to cover just 1.2GW of average peak demand.

The same model would allow only the most efficient UK coal-fired plants a role even with demand at 47GW — the average demand in the peak half-hourly period of peak first-quarter days. With 52pc-efficient gas units nudging their way into the theoretical merit order, only around 3GW of coal-fired power would be needed to balance the system, equivalent to around 30pc of total coal-fired generation available capacity.