The Treasury-enforced tax on coal emissions almost doubled in April from £9.55/MWh to £18.08, shifting the economics of the energy mix towards more profitable gas-fired power, according to market experts at Icis.
But even since the higher carbon tax was put in place on 1 April, coal-fired profitability has taken a further hit from falling oil prices and currency values. The profitability of coal-fired power in third quarter of this year was estimated at a yearly high of £5.72/MWh on 2 April but slumped to just £2.58/MWh a month later, Icis reported.
Dollar denominated coal offered less value for money to UK purchasers which were hit by a weaker sterling-dollar rate while at the same time losses on the Brent crude market continue to feed through to oil-indexed gas contracts through the summer.
In contrast to coal profits of £2.58/MWh for Q3 gas-fired power will be almost £3.
“These dynamics mean that combined cycle gas turbines could out-compete coal plants for meeting British power demand in the three month period,” Icis editor Albert Evans said.