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European Energy Markets
4JUN

German gas plants priced out of merit

3 min read
10:45UTC

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

← Back to France EUR 9, Germany EUR 103: heat splitsJump to analysis ↓
EconomicAssessed
Key takeaway

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

German day-ahead power cleared an average of EUR 103.16/MWh on Monday 20 July, inside a range running from EUR 0.00 to EUR 194.77 1. 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 EUR 102 to EUR 108 per MWh of electricity. EUA carbon at EUR 80.00 2, at roughly 0.2 tonnes per MWh, adds another EUR 16. Marginal cost therefore lands between EUR 118 and EUR 124 against EUR 103.16 of revenue, putting the clean spark spread between minus EUR 15 and minus EUR 21. Four sessions earlier it was positive, on German day-ahead at EUR 156 and carbon at EUR 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 EUR 7 to EUR 8 of extra generation cost, while carbon has not moved at all. The power leg did the rest, falling more than EUR 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 EUR 8 of it and hoping nobody checks the other EUR 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 baseline 3. The bloc still reached 52.49% on 15 July on data from GIE, the Gas Infrastructure Europe body that runs the AGSI+ transparency platform 4, 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 EUR 118 to EUR 124/MWh sits well above the EUR 103.16 day-ahead print, and only roughly EUR 7 to EUR 8/MWh of that gap traces to the Hormuz-linked gas premium. The remainder, more than EUR 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.

Sources:SMARD / Bundesnetzagentur via energy-charts.info·ICE via Investing.com
Mentions:TTF →EUA →CCGT →Oil Market Report →Germany →GIE AGSI+ →
First Reported In

Update #28 · Hormuz premium inverts the German spark spread

SMARD / Bundesnetzagentur via energy-charts.info· 20 Jul 2026
Read original →
Causes and effects
Caused by
German power climbs to EUR 156, spark flips
The positive clean spark spread recorded on 16 July inverted to negative by 20 July as gas and carbon costs outpaced power revenue.
Occurred 16 Jul 2026
Read story →
EUA carbon slips back below EUR 81
EUA's EUR 80.14 close on 16 July fed into the same EUR 16 carbon floor that holds marginal cost above power revenue on 20 July.
Occurred 16 Jul 2026
Read story →
This Event
German gas plants priced out of merit
A negative clean spark spread removes gas-fired demand at the exact point in the calendar when Europe needs every molecule going into storage.
Different Perspectives
Marine insurers and AIS trackers covering Hormuz
Marine insurers and AIS trackers covering Hormuz
AIS data shows severe curtailment on 20 July, 479 vessels anchored, 36 dark, 123 still broadcasting inside the strait, not the closure the IRGC claims. War-risk premiums move on the unresolved CENTCOM-IRGC contest itself, since underwriters price the dispute as much as the count.
QatarEnergy
QatarEnergy
Ras Laffan has run at minimum output under force majeure into August since 9 July, a constraint already priced before this week's claim. The 17-20 July move is risk premium stacked on that standing loss, not a new physical loss at the plant.
ACER and the European Commission
ACER and the European Commission
ACER opened the REMIT reporting consultation on schedule on 16 July, giving firms to 11 September before a quarter to build systems against Regulation 648/2012. Brussels' separate silence on StromVKG state-aid clearance leaves Berlin's own capacity mechanism without legal authorisation.
EDF and French grid operator RTE
EDF and French grid operator RTE
France's discount to Germany rests on an ASNR derogation from the 28C river-cooling limit at Bugey that expires today, not on a nuclear recovery; Chooz, Golfech and Bugey restarts run to 25 July. The cheap leg holds only as long as regulators keep waiving the limit each heatwave.
German CCGT operators and grid balancers
German CCGT operators and grid balancers
German gas plants went off-merit on 20 July as the clean spark spread inverted to minus EUR 15 to minus EUR 21/MWh, sidelining the flexible capacity storage injection needs. Operators are pricing 2027-28 capacity revenue against Bundesnetzagentur's own admission that Brussels has not cleared the 9 GW StromVKG auctions.
LNG spreads desk
LNG spreads desk
The JKM-TTF arb flipped to a TTF premium of roughly USD 0.6/MMBtu on 15 July, the first time this cycle Europe has outbid Asia, yet no Atlantic cargo has rerouted west. Until a cargo actually moves, the desk reads the Hormuz premium as unconfirmed and the EUR 55 print as vulnerable to a fast reversal.