Gas-fired power generation in Southeast Europe is experiencing a notable transition as it moves from a mid-merit operational stance to a primarily peaking and balancing role. This shift is occurring despite recent improvements in the short-term economic landscape for energy markets.
In the 16th week of the year, gas prices at the Central European Gas Hub (CEGH) fell to €44.9/MWh. This price decline resulted in a significant rise in clean spark spreads, which increased by approximately €24.6/MWh compared to the previous week. Typically, such an improvement in spark spreads would lead to an uptick in gas-fired generation; however, current output levels have remained low at around 3,144 MW, nearing multi-month lows.
This situation underscores the growing impact of renewable energy sources, particularly solar and wind, which are increasingly dictating market prices throughout large parts of the day. Consequently, gas plants are relegated to operating mainly during peak demand periods or when renewable generation falls short. As utilization rates decline, many gas plants are projected to function at 10–20% capacity factors over the coming years.
The revenue models for gas-fired plants are evolving as well. These facilities are shifting away from consistent participation in energy markets and are instead focusing on capturing value during limited high-price intervals. This change leads to a concentration of revenues within a narrow window of hours, thereby increasing both risk and volatility for operators of these assets.
<pIn markets like Greece, gas continues to play a crucial role due to the existing generation mix and liquefied natural gas (LNG) infrastructure. However, even in these regions, the increasing penetration of renewables is gradually diminishing gas's traditional role.
The long-term perspective indicates that while gas-fired generation will remain vital for ensuring system reliability, its economic function is likely to transition towards providing flexibility rather than serving as baseload power. This evolution raises critical considerations regarding future investment strategies and the necessity for capacity remuneration mechanisms aimed at guaranteeing sufficient supply during peak demand periods.
