European power price sensitivity: Low gas price case

Gas will continue to play a major role in decarbonising Europe’s power markets as a transient replacement for generation from retiring coal plants and provider of flexibility. The fuel’s influence on power prices is therefore significant. This sensitivity analysis takes our Q3 2020 Europe power markets outlook and introduces a low gas price case, consistent with research produced by Wood Mackenzie’s commodities teams to assess the potential implications of a second wave of global Coronavirus containment measures on oil and gas prices. Applying the low gas price case enables us to assess how power market prices behave under differing commodity price conditions and whether varying degrees of renewable penetration and technology mixes across markets have a material bearing on capture prices under such conditions. The low gas price sensitivity reveals a substantial impact on power prices.