<article><p class="lead">Coal-to-gas fuel switching cut coal-fired generation in the Netherlands by more than 50pc year on year in January-August, despite power generation increasing.</p><p>Dutch coal-fired generation totalled 5.2TWh in January-August, down from 12.8TWh a year earlier. This was despite the country's overall power generation increasing by 2pc on the year to 77.8TWh — an atypical trend in Europe, where power demand has been severely affected by the Covid-19 pandemic.</p><p>Coal was partly displaced by competitive gas-fired generation, which increased to 47.8TWh in the first eight months of the year, from 44.9TWh a year earlier.</p><p>Clean spark spreads for a 61pc efficient gas-fired plant were €15.15/MWh wider than clean dark spreads for a 40pc efficient coal-fired plant in January-August. This was almost double the average gas-fired advantage of €8.96/MWh a year earlier, boosting the coal-to-gas fuel-switching incentive in 2020.</p><p>Clean spark spreads for a 61pc efficient gas-fired plant from the beginning of September to 25 November were €8.84/MWh wider than clean dark spreads for a 40pc efficient coal-fired plant. This is higher than the average gas-fired advantage of €8.06/MWh for the same period of 2019, potentially driving further — albeit more limited — coal-to-gas fuel switching.</p><p>Generation from other sources has also increased and pressured Dutch coal burn in 2020, with wind power increasing by 1.8TWh year-on-year to 8.9TWh in January-August and solar generation rising by 2TWh to 6.3TWh.</p><h2>Carbon price floor</h2><p class="lead">The Dutch senate is in the process of introducing a new carbon price floor for electricity generators, although it is unlikely to make a material difference to generation costs.</p><p>The proposal for the new top-up tax was put forward by the Dutch government in June last year and is due to be debated in the House of Representatives next month.</p><p>The carbon price floor for electricity generators was originally set to apply from 1 January 2020, starting at €12.30/t CO2 equivalent (CO2e) and rising to €13.50/t CO2e in 2021 and €31.90/t CO2e in 2030. But with the December 2021 emissions trading system contract currently trading at more than €27.21/t CO2e, the new price floor is unlikely to have any immediate effect on carbon costs for generators in the next few years.</p><p>The Netherlands adopted a law in 2019 prohibiting the use of coal for the production of electricity beyond 1 January 2030.</p><p>Vattenfall's Hemwig 8 coal-fired plant, which emitted around 3.6mn t/year of carbon dioxide, closed in December last year.</p><p class="bylines">Robert Preston</p><p><div class="picture"><div><span class="pic_title">Dutch Jan-Aug power generation</span> <span class="units">TWh</span></div><img src="https://argus-public-assets-us.s3.amazonaws.com/2020/11/26/ned26112020121759.jpg"></div></p></article>
