German 2011 Power Falls From Five-Month High as Gas Prices Drop - BusinessWeek

December 31, 2010, 7:52 AM EST

By Lars Paulsson

Dec. 31 (Bloomberg) -- German electricity for delivery next year fell from a five-month high as natural gas prices declined, potentially making electricity generation less expensive.

Baseload power for 2011 fell as much as 55 cents, or 1.1 percent, to 51.95 euros ($69.43) a megawatt-hour, according to broker data compiled by Bloomberg. The contract, which expires today, traded at 52.05 at 11:52 a.m. Berlin time. Baseload is delivered around the clock.

The contract is heading for an 0.8 percent gain this year, reversing last year’s drop as Europe’s biggest economy recovered from the worst recession since World War II and boosted energy demand. It yesterday traded at its highest since July 6.

Natural-gas prices in the U.K., Europe’s biggest market for the fuel, declined for the next three months, with January sliding 2.1 percent to 61.60 pence a therm. Prices there affect those in the rest of the continent. Gas is used to generate about 15 percent of Germany’s power.

Hard coal for next-year delivery to Amsterdam, Rotterdam or Antwerp yesterday rose as high as $122.25 a metric ton, its highest in two years. The fuel accounted for 18 percent of Germany’s power generation last year. The country also gets electricity from lignite, or brown coal, as well as from nuclear plants and wind and solar power.

Utilities including E.ON AG and RWE AG, Germany’s two biggest, would make a profit of 2.11 euros a megawatt-hour by burning coal at power plants to generate electricity, taking the cost of the fuel and carbon emissions into account. The so- called clean dark spread, based on 2011 prices, closed yesterday at 2.33 euros, according to Bloomberg calculations.

Bloomberg tracks power prices from brokers including GFI Group Inc., ICAP Plc, Tradition and Spectron Group Ltd.

--Editors: John Buckley, Mike Anderson

To contact the reporter on this story: Lars Paulsson in London at lpaulsson@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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