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Drones: Industry & Defence
26OCT

German gas plants priced out of merit

3 min read
15:07UTC

German day-ahead cleared €103.16/MWh on Monday against a CCGT marginal cost of €118 to €124, inverting the clean spark spread and pushing the fleet off-merit into the worst July injection pace in six years.

TechnologyAssessed
Key takeaway

German CCGTs now lose up to €21 per MWh, freeing gas for caverns filling 17% slower.

German day-ahead power cleared an average of €103.16/MWh on Monday 20 July, inside a range running from €0.00 to €194.77⁠1. Solar and wind oversupply held the 03:00 to 06:00 block at zero for four hours; the evening peak carried the top of the range.

Put the three verified inputs together. Monday's TTF settlement, burned through a modern combined-cycle gas turbine at 55 to 58% efficiency, costs €102 to €108 per MWh of electricity. EUA carbon at €80.00⁠2, at roughly 0.2 tonnes per MWh, adds another €16. Marginal cost therefore lands between €118 and €124 against €103.16 of revenue, putting the clean spark spread between minus €15 and minus €21. Four sessions earlier it was positive, on German day-ahead at €156 and carbon at €80.14.

Only part of that swing belongs to Hormuz, and the decomposition deserves stating rather than glossing. The fuel leg carries the conflict premium and nothing else: gas has risen since 15 July, worth €7 to €8 of extra generation cost, while carbon has not moved at all. The power leg did the rest, falling more than €50 from Thursday's print, and a Monday in late July carrying four hours of zero-priced solar has an ordinary seasonal component behind it that no conflict explains. Call the split roughly 13% conflict, 87% weather and calendar. Anyone selling this as a pure Hormuz effect is selling about €8 of it and hoping nobody checks the other €50.

Either way the fleet stays off-merit, and the storage consequence does not change. Gas that would have gone into German turbines now has somewhere else to go, and the caverns need it: net EU injections since 1 July are running 17% below last year, the slowest July fill pace in six years against the 5 July baseline⁠3. The bloc still reached 52.49% on 15 July on data from GIE, the Gas Infrastructure Europe body that runs the AGSI+ transparency platform⁠4, so the level keeps climbing while the pace falls behind. Whether a spread this negative converts into a faster injection rate over the coming week is the practical test of whether demand destruction buys anything for the November floor.

Deep Analysis

In plain English

A "clean spark spread" is the profit a gas-fired power plant makes from selling electricity after paying for its gas and its carbon permits. When that number goes negative, as it did in Germany on 20 July, running the plant loses money. Two things happened at once: a burst of solar power pushed midday electricity prices to zero for four hours, and gas costs stayed high because of the Hormuz standoff in the Gulf. Plant operators are stuck between cheap power they cannot profit from and expensive fuel they still have to buy, which is why the country's gas fleet went "off-merit", meaning it is too costly to run right now.

Deep Analysis
Root Causes

A four-hour window of zero-priced solar generation removes the hours in which CCGT plants can recover their marginal cost, and German gas units face real start-up costs that make cycling off and back on within a single day expensive, so operators are stuck holding capacity that clears below cost rather than shutting down for a few hours.

The fuel side compounds the squeeze but is not the main driver: marginal cost of €118 to €124/MWh sits well above the €103.16 day-ahead print, and only roughly €7 to €8/MWh of that gap traces to the Hormuz-linked gas premium. The remainder, more than €50/MWh, is the power leg falling from Thursday's heat print into a Monday session with weak demand and heavy solar output.

What could happen next?
  • Consequence

    CCGT operators facing repeated negative spark spreads have a stronger incentive to bid into StromVKG's capacity auctions for guaranteed standby revenue rather than rely on wholesale margins alone.

  • Risk

    If the fuel-cost leg reverses once Hormuz risk eases while the solar-driven power leg persists through summer, the spread could stay negative even after gas prices fall, exposing operators who assumed today's loss was fuel-driven and temporary.

First Reported In

Update #28 · Hormuz premium inverts the German spark spread

SMARD / Bundesnetzagentur via energy-charts.info· 20 Jul 2026
Read original →
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Written with AI from Lowdown's published reporting. Not individually reviewed by an editor. Editorial standards.