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Natural gas to stay above €45/MWh

image credit: Heliac
Jakob Jensen's picture
Chief Commercial Officer Heliac

I am the commercial director in Heliac. Heliac produces solar-generated utility-scale heat for district heating and industrial processes up to 200C. The low-cost, scalable method enables heat...

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  • Oct 12, 2021
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According to the pricing of natural gas futures, gas prices should drop from the current €80-100/MWh level towards €20/MWh by the end of the decade, i.e. close to the extreme lows of 2020. This scenario may or may not hold true. However, the actual full price of natural gas large-scale users of natural gas for industrial processes will have to pay for their energy is likely to never get close to this level again.

Why? Because the full price includes:

  • Costs for transmission and distribution, which according to the Danish Energy Agency carries an average cost of €4/MWh.
  • Local non-deductible taxes, which in Europe on average adds 15% to the cost.
  • Carbon emission prices, which according to an average of forecasts from IEA, OECD, and a peer-reviewed article in Nature, in itself is likely to contribute €20/MWh by 2030.

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Add these scenarios up and it looks like the full cost of natural gas permanently will stay north of €45/MWh.

There are many possible consequences of this. Coming from the side of renewables for industrial heat, I will mention that

  • at €45/MWh some renewables are competitive to natural gas even without subsidies,
  • the price of renewables is non-volatile,
  • carbon emission prices may increase even further (e.g. the analysis expects carbon prices to be at €75/ton by 2025, however, given that the price has increased from €25/ton to €60/ton over the last 12 months, it may be argued that the price will go much higher than forecasted here).
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Matt Chester's picture
Matt Chester on Oct 12, 2021

With more renewables on the grid, many have been looking to natural gas as the go-to back up resource to ensure reliability of the grid. Will higher than expected prices of natural gas undercut that in any way? 

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