Gas-fired power generation in Southeast Europe is experiencing a notable transformation, moving from a mid-merit generation role to one that primarily focuses on peaking and balancing capabilities. This shift occurs despite recent improvements in short-term economic conditions, indicating a broader structural change within the energy landscape.
In week 16, gas prices at the CEGH hub fell to €44.9/MWh, which led to a substantial increase in clean spark spreads by approximately €24.6/MWh compared to the previous week. Traditionally, such a rise in spark spreads would suggest an uptick in gas-fired electricity generation. However, the actual output remained low at around 3,144 MW, marking close to multi-month lows and underscoring the growing dominance of renewable energy sources.
The increasing prevalence of solar and wind power is reshaping market dynamics, as these renewables are now setting prices for significant portions of the day. Consequently, gas plants are relegated to operating primarily during peak demand periods or when renewable generation falls short. This trend has led to declining utilization rates, with many gas plants projected to function at 10–20% capacity factors in the foreseeable future.
Furthermore, revenue models for gas-fired plants are evolving. Instead of relying on stable participation in energy markets, these facilities are becoming more dependent on capturing value during specific high-price intervals. This shift concentrates revenues into a limited number of hours, heightening both risk and volatility for operators managing these assets.
<pIn certain markets, such as Greece, gas continues to play a vital role due to the existing generation mix and liquefied natural gas (LNG) infrastructure. Nonetheless, even in these regions, the increasing penetration of renewables is gradually diminishing the reliance on gas-fired generation.
Looking ahead, while gas-fired power generation will remain critical for ensuring system reliability, its economic function is expected to transition towards providing flexibility rather than serving as a baseload power source. This evolution raises significant considerations regarding future investments and highlights the necessity for capacity remuneration mechanisms to guarantee adequate supply during peak demand periods.
