12 Jun 2020, 13:31
Sören Amelang

Energy markets recovering from corona shock, but coal faces 'toxic mix' – experts

Tagesspiegel Background

Energy markets have largely recovered from the upheaval caused by the coronavirus, and most experts expect few lasting consequences except that coal remains under pressure, reports Jakob Schlandt in the energy newsletter Tagesspiegel Background. "The market no longer assumes that things have changed fundamentally," said Hanns Koenig from the consultancy Aurora Energy Research. Mirko Schlossarczyk from the consultancy enervis told the author that "after the initial demand shock, market participants are increasingly classifying the corona crisis as a relatively short-term, albeit massive, turbulence." He added that medium-term scenarios for the period after 2023 are hardly affected by the pandemic.

After an initial drop, the price for emission certificates in the EU's trading system has almost returned to pre-crisis levels. Koenig said this was also due to the policy reaction. "There are no indications that policy on the EU level will deviate from decisive climate action." He added that calls for weakening climate policy in response to the crisis have subsided both in Germany and in Europe. "The opposite interpretation of the crisis has even prevailed: Corona is interpreted by many actors as a wake-up call for the climate crisis. The European response, but also the German economic stimulus package with many climate policy elements, has contributed to this," Koenig said.

Power demand and wholesale prices are also approaching pre-corona levels, albeit much more slowly. A notable exception is gas prices, which have fallen to unprecedented low levels due to the mild winter and full gasholders. This development has created a perfect storm for coal plants, according to the experts. "The combination of reduced electricity demand, extremely low gas prices and recovering CO2 prices remains a toxic mix," Schlossarczyk said. As a consequence, coal plants lose out to gas plants on the market. "In the end, the corona crisis only accelerated the long-term decline of coal," he added.

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