The price of coal has fallen just 3.3% in the last ten days, while power and gas have lost between 18% and 19%. Carbon on the other hand has lost 35%.
The outcome of these various moves is that the clean dark spread and clean spark spreads have both moved slightly higher, as the chart below shows:
All very status quo.
What’s perplexing though is how coal has remained so stable. I’ll ignore the whys and focus on the clean and dark spreads, because coal’s stability, which must be nice for anyone long that market, is also preventing a change in the merit order for power generation.
If we adjust the daily API2 coal price over the last ten days to match the percentage average move of German baseload power, then the clean dark and clean spark spreads look like this:
It'll be worth keeping an eye out on coal, though that market doesn't seem to be nearly as febrile as power, gas or carbon at the moment. If coal goes into a tailspin, then we could see the clean dark spread start to improve significantly.
Alternately, gas prices could rally over the next few months as the traditional injection season starts, and utilities buy gas into storage against next winter's demand. Both moves would theoretically narrow the clean spreads, which would in turn prompt more demand for carbon.