Natural gas will probably start to replace coal in U.K. power generation as oil’s decline helped damp prices to their lowest since August.
Wholesale costs are close to levels where generators will increase output from gas-fired plants at the expense of coal, according to Energy Aspects Ltd. The transition will be led by five facilities owned by utilities from RWE AG (RWE) to Centrica Plc (CNA) that produce enough power to supply about 11 million households, Yarm, England-based Enappsys Ltd. said.
Jefferies Group LLC last week cut its 2015 U.K. gas forecast by 26 percent after the drop in oil costs, while HSBC estimates that prices will this year average 14 percent below 2014. Cleaner-burning gas usually declines in summer, when demand for heating is lower, making it more attractive for power generation.“It’s the first time we have been close to the switching range this time of year since 2010 and if prices keep falling, producing power from gas will become cheaper than from coal,” Wayne Bryan, an analyst at Alfa Energy Group in London, said by e-mail on Monday. “Lower gas prices will help cut electricity costs for consumers and have a positive influence on the U.K.’s mandate of reducing carbon emissions.”