1OCT

German gas plants priced out of merit

3 min read

19:22UTC

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.

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ConflictAssessed

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.

Source Landscape

This story draws on neutral-leaning sources

Primary parallel: German day-ahead power itself flipped the clean spark spread from roughly negative on 14 July to positive by 16 July as cooling demand rose under the same heat dome. The fleet has already shown it can swing from off-merit to on-merit and back inside a single week.

Counter-parallel: Over 6 to 10 July, German and French baseload rose together rather than diverging, squeezing Germany's spread without inverting it. Heat and solar do not always push CCGT fully off-merit; sometimes they only narrow the margin, which argues against reading every hot spell as a guaranteed inversion.

Consensus view: The Oxford Institute for Energy Studies has tracked German CCGT running margins collapsing repeatedly this window as renewables build-out compresses the hours in which gas plants can clear the market, framing today's inversion as the fleet's structural exposure showing through rather than a one-off.

Counter-view: The IEA's July Oil Market Report flags that the same Hormuz-linked escalation clouding its 2027 supply outlook is also the reason gas-fired fuel costs are elevated at all; on that reading the spread's fuel leg, not its power leg, is the part genuinely exposed to reversal if the strait standoff eases.

Key tension: Whether the dominant driver is Germany's own thin flexibility to shut CCGT capacity around a midday solar glut, a structural condition, or the volatile fuel-cost input from The Gulf, which could unwind the inversion within days rather than months.

Sources:SMARD / Bundesnetzagentur via energy-charts.info·ICE via Investing.com

Mentions:TTF →EUA →CCGT →IEA Oil Market Report →Germany →GIE AGSI+ →Oxford Institute for Energy Studies →

First Reported In

Update #28 · Hormuz premium inverts the German spark spread

SMARD / Bundesnetzagentur via energy-charts.info· 20 Jul 2026

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Causes and effects

Caused by

German power climbs to €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

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EUA carbon slips back below €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

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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.

Led to

German caverns quit the prompt-gas bid

The 20 July negative spark made cavern injection uneconomic, stalling German storage buying.

Occurred 21 Jul 2026

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German spark spread hits cycle worst

The 20 July spark-spread inversion (ID:5152) deepened into the cycle's worst print as wind, not the earlier gas/carbon premium, took over as the driver.

Occurred 26 Jul 2026

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German gas plants back in profit

The clean spark spread flipped positive, reversing the negative spread recorded on 20 July when gas and carbon costs outpaced power.

Occurred 30 Jul 2026

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Different Perspectives

Russia

Russia vetoed the same renewal on 17 September, arguing that Britain, France and Germany never validly triggered the snapback that reimposed the pre-2015 UN resolutions. No panel was ever seated under that mandate, so the UN list decays fastest for states that screen against it rather than against the American one.

China

China vetoed renewal of the UN sanctions monitoring mandate on 17 September, arguing that Resolution 2231 terminated on 18 October 2025 and that the Security Council should drop Iran's nuclear file altogether. On that reading there is nothing to monitor, so the sanctions survive and their enforcement does not.

Iraq

Baghdad saw the last American counter-Islamic State troops leave its territory on 30 September, completing a timetable it agreed with Washington in September 2024. Iraqi airspace deconfliction passes to Baghdad, which still has an open inquiry into the Maysan drone launches that has named nobody.

Pakistan

Treasury names Waseem Pasha Tajammal of Rawalpindi as the Cavalier group's chairman and places one of the designated incorporations in Islamabad. QatarEnergy separately told Pakistan that liquefied natural gas cargo cancellations would run through November, so Islamabad carries an enforcement question and a supply gap at once.

Turkey

Treasury named a Cavalier Dynamics company incorporated in Istanbul among the ten nodes it designated on 29 September, and Ankara has published no response. Turkey imported a record 120,000 barrels a day of Indian diesel in August, cutting Russia's share of its diesel imports to 20 per cent.

India

Suraj Yadav, a wiper from Uttar Pradesh, was killed aboard the Cape Dao on 23 September, and 19 of the ship's 20 Indian crew were taken off alive. India's September imports ran at 575,000 barrels a day from Iraq and 566,000 from Saudi Arabia, back to pre-conflict rates.