Current developments on the coal and gas markets and their retroactive effects on the Merit Order

Coal and gas continue to play a significant role in the European power generation system, especially in Germany. According to the AG energy balances, the share of hard coal in German gross electricity generation in 2016 was 17.2% and natural gas 12.4%. In addition to the CO₂ price, the prices for steam coal and natural gas are a key factor in determining which gas or coal power station is in Merit Order and whether it comes to a fuel switch. Declining gas prices have been rising sharply since the middle of 2016, and the volatile prices for steam coal have been rising. This article discusses the developments and factors responsible for these developments, which could be expected in the near future, and the implications for the gas-coal spread in the electricity market.