The Pexapark Podcast From Backbone to Back up? Understanding Gas’s Role in Setting Future Power Prices
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Apr 30, 2025 Seb Kennedy, Founding Editor of Energy Flux, sheds light on the dynamic landscape of global gas markets. He discusses whether gas can still anchor European energy prices as renewable sources rise. There's a thought-provoking exploration of gas's potential transition to backup power and the implications of increased battery integration. Additionally, geopolitical factors, especially the Ukraine situation, are impacting future pricing regimes. Kennedy's insights into US and European LNG margins provide a captivating glimpse into what's ahead for the natural gas sector.
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Gas as Europe's Price Anchor
- Gas remains the marginal price setter for European power when it runs, despite increasing renewable energy penetration.
- Renewables push prices low, but gas causes sharp price spikes when it covers demand shortfalls.
Thermal Plants Capture Higher Prices
- Thermal plants run fewer hours but capture higher prices by operating mainly during peak periods.
- This leads to higher capture prices, sometimes exceeding average wholesale prices over a full day.
Managed Chaos in Energy Transition
- The energy transition is "managed chaos" with inefficiencies caused by insufficient grid infrastructure.
- Transmission bottlenecks lead to expensive and inefficient generation balancing between wind and gas.