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CCNet 25/07/13

Germany’s Biggest Energy Company Considers Fleeing Europe

British Energy Companies May Shut Down Power Plants To Receive Subsidies 



German utility E.ON is considering dismantling some European power plants that have been mothballed because of poor profitability and relocating them to faster-growing emerging markets such as Turkey, people familiar with the matter told The Wall Street Journal Wednesday. The radical idea underscores the dire situation facing many utilities in Europe, where the combination of weak energy demand caused by the economic crisis and the rapid expansion of renewable energy is undermining the conventional power-generation business. --Hendrik Varnholt and Jan Hromadko, The Wall Street Journal, 25 July 2013
 
 
 
 
German operators of coal and gas power plants are sounding the alarm: the operation of many power plants is no longer profitable as a result of the green energy transition. Dozens of plants could be closed down, the industry warns. Of approximately 90,000 megawatts of conventional power capacity in Germany up to 20 percent could be shut down, the newspaper quoted the CEO of a utility. In the worst case scenario, Germany would face blackouts. --Reuters, 16 July 2013
 
 

 
Because of the booming green energy, many conventional power plants in Germany are no longer economic to operate. Some utilities are threatening to shut down their power plants. But even when a plant can no longer be operated profitably, utilities cannot simply take such a plant off the grid. At the end of last year, the German Parliament put a stop to that. The Network Agency may order that it must be kept in operation for up to two years. For this, the power company has the right to a "fair compensation" by the network operator, which will be included in the electricity prices and be paid by the consumers. --Frankfurter Allgemeine Zeitung, 16 July 2013
 
 
 


 
 
The boss of one of Britain’s biggest energy companies has warned that the Government’s new plan to stave off the growing threat of blackouts could increase the risk of the lights going out. Under the plan announced this month, the owners of mothballed power plants would be offered lucrative subsidies to rush them back into action during times of peak demand. But Keith Anderson, the chief corporate officer of Scottish Power, said that energy companies could deliberately mothball plants that they would otherwise have kept open to make them eligible for the payments. This would cut Britain’s precariously thin spare generating margin even further. --Tim Webb, The Times, 25 July 2013
 
 

 
German coal-fired power plants have been operating in full swing in the first half of 2013. Lignite and hard coal power plants and gas plants delivered 12.4 percent more power in the first half years, according to figures by the Federal Association of German Electricity Association. As a result, German greenhouse gas emissions will rise again in 2013, just as they did in 2012. Already in 2012 lignite and hard coal power plants had emitted approximately four percent more CO2. The data for the first half year now show that this trend will significantly worsen. --Der Westen, 23 July 2013
 
 

 
Exxon Mobil Corp., Bayer AG and Linde AG are among companies at risk of having to repay billions of euros in German aid as Chancellor Angela Merkel clashes with Europe’s antitrust regulator over rebates to companies that use the most energy. A total of 1,691 companies or units are benefiting from power fee waivers worth about 4 billion euros ($5.3 billion) this year, according to data from German authorities. While the European Commission is examining whether the waivers constitute illegal state aid, Merkel said they’re key to safeguarding the competitiveness of Europe’s biggest economy. --Stefan Nicola & Naomi Kresge, Bloomberg, 17 July 2013 
 
 
 
 
ScottishPower has reignited the row over who is to blame for rising energy bills after reporting the costs of government energy efficiency schemes had more than doubled since last year. Analysts warned that suppliers were likely to increase prices by a “high single digits” percentage before winter, due to rising costs from the schemes as well as wind farm subsidies, the new carbon tax and network upgrade costs. --Emily Gosden, The Daily Telegraph, 25 July 2013
 
 
 
 
Diplomats from several EU states have accused Germany of using threats, intimidation and blackmail to sideline green cars legislation in an unprecedented display of hubris within the Brussels’ corridors of power. EurActiv has heard allegations that the German Chancellor, Angela Merkel, used what one diplomat called “nasty pressure” against EU countries to stall debate on new regulations aimed at limiting car emissions to 95 grams of CO2 per km by 2020. EurActiv understands that the UK also agreed to support Germany’s manoeuvre, after a quid-pro-quo was offered of German quiescence in the stymieing of a planned vote on the UK’s budgetary rebate at the summit. --EurActiv, 22 July 2013
 
 
 
 
 
1) Germany’s Biggest Energy Company Considers Fleeing Europe - The Wall Street Journal, 25 July 2013

2) German Energy Companies Threaten Shutdown Of Power Plants - Reuters, 16 July 2013

3) Green Germany: €600 Million Subsidies To Keep Uneconomic Fossil Fuel Plants Running - Frankfurter Allgemeine Zeitung, 16 July 2013

4) UK Energy Companies May Shut Down Power Plants To Receive Subsidies - The Times, 25 July 2013

5) Green Germany: Coal Power Expanding, Green Energy Stagnating, CO2 Emissions Rising - Der Westen, 23 July 2013

6) Green Germany: Merkel’s 4 Billion Energy Handout For Big Industry At Risk - Bloomberg, 17 July 2013

7) House Of Lords Launches Inquiry Into Economic Impact Of Shale Revolution - House of Lords Economic Affairs Committee
 

 
1) Germany’s Biggest Energy Company Considers Fleeing Europe
The Wall Street Journal, 25 July 2013

Hendrik Varnholt And Jan Hromadko

European Plants May be Moved to Emerging Markets

German utility E.ON is considering dismantling some European power plants that have been mothballed because of poor profitability and relocating them to faster-growing emerging markets such as Turkey, people familiar with the matter told The Wall Street Journal Wednesday.

The radical idea underscores the dire situation facing many utilities in Europe, where the combination of weak energy demand caused by the economic crisis and the rapid expansion of renewable energy is undermining the conventional power-generation business.
E.ON isn’t the only company considering drastic measures. On Tuesday, Swedish utility Vattenfall AB, opened the door to the sale of its power business in continental Europe. E.ON’s main German rival, RWE AG, has warned it could shut down a fifth of its power plants.

One of the plants that E.ON could pack up and ship overseas is the 430-megawatt combined-cycle gas turbine power plant in Malzenice, Slovakia, said a person familiar with the company’s thinking. If E.ON’s calculations prove that a move is economically viable, the plant could be moved to Turkey, which is a more attractive market with stronger energy-demand growth, the person said.

E.ON expanded into Turkey earlier this year in partnership with local conglomerate Haci Omer Sabanci Holding. Together, the companies plan to develop around 8,000 megawatts of power generation capacity by 2020, equivalent to around 10% of Turkey’s overall capacity.

E.ON has invested around €400 million ($526 million) in the gas-fired Slovakian plant, but it will go offline in October less than three years after it was commissioned because it has been making a loss, E.ON said earlier this month.

Power plants fueled by gas are suffering the most in Europe because of a combination of high fuel prices and intense competition from cheaper coal supplies. The surge in production of wind and solar energy is also reducing demand for gas-fired power, because these forms of renewable energy compete directly with facilities like Malzenice in serving peak electricity demand.

Since it began operating in January 2011, the Malzenice plant has operated for only around 5,600 hours, well below its target of 4,000 hours to 5,000 hours per year, E.ON has said.
E.ON isn’t alone in its troubles. Germany’s largest power producer by capacity, RWE, has also warned that it is struggling to operate its fleet of fossil-fuel power plants profitably. Chief Executive Peter Terium has said that around one-fifth of the company’s 50 gigawatt power generation capacity is at risk of being shut down.

Swedish state-controlled utility Vattenfall wrote down the value of its power plants by €3.5 billion Tuesday, blaming low power prices and muted energy demand across Europe.

Oystein Loseth, the company’s chief executive said he didn’t expect the European power market to recover in the foreseeable future. Vattenfall will now consider the full or partial sale of its continental European business, although it will retain full control of its operations in the Nordic region.

Full story
 

2) German Energy Companies Threaten Shutdown Of Power Plants
Reuters, 16 July 2013

German operators of coal and gas power plants are sounding the alarm: the operation of many power plants is no longer profitable as a result of the green energy transition. Dozens of plants could be closed down, the industry warns.

Numerous coal and gas power plants apparently are threatened by a shutdown. According to a report in the Süddeutsche Zeitung (SZ), many companies and municipal utilities are assessing the cost of dozens of power plants.  As a result, the security of supply is at risk because many of the plants could be shut down. Of approximately 90,000 megawatts of conventional power capacity in Germany up to 20 percent could be shut down, the newspaper quoted the CEO of a utility. In the worst case scenario, Germany would face blackouts.

Nuclear power plants, too, could be taken off the grid ahead of time, according to industry sources. The problem for the energy sector is that their power plants are less and less supplying power to the grid because of the ongoing boom in green energy. The growing supply of electricity reduces the market price for electricity so strongly that their operation is no longer economic.

With their warning, the companies are increasing the pressure on the Federal Government. Only last week, the Stadtwerke Alliance Trianel had sounded the alarm. The subsidies for green electricity must be reformed urgently, said Trianel manager Sven Becker. Although green power already has a share of 25% of electricity consumption, the subsidies continue unabated. ”Fossil power plants must also be able to be profitable”, demanded Becker.

So far, the Federal Network Agency has received 15 applications to close down power plants, the SZ reports. E.ON, the largest energy company in Germany, has decided to close down eleven power plants in Europe by 2015. The profitability of other plants is under consideration. Its competitor RWE announced similar shut down plans.

The initial response by the Ministry of Economy was brief. The ministry said that any decision about the operation or shutdown of power plants was one for the owners to make. However, the government could pass a law to keep power plants on the grid if the supply security were in danger.

Translation: Philipp Mueller
 

3) Green Germany: €600 Million Subsidies To Keep Uneconomic Fossil Fuel Plants Running
Frankfurter Allgemeine Zeitung, 16 July 2013

Because of the booming green energy, many conventional power plants are no longer economic to operate. Some utilities are threatening to shut down their power plants. But they could be forced to keep the plants running on the grid.

Several corporations and public utilities are checking the cost of dozens of their power plants, according to a press report. The problem for the utilities is that their power plants are increasingly used intermittently because of the ongoing boom in green energy. The growing supply of electricity reduces the market price so strongly that their operation is no longer economic. The production costs are higher than the sales price. Therefore operators are making losses, reports the "Süddeutsche Zeitung".

In fact, plans for the closure of 15 power plants (coal and gas) have been announced to the Federal Network Agency, according to a spokeswoman. Among them are also some plants in southern Germany, where the power supply is tight anyway.

Shutting power plants down is not so simple: "Power plant closures at this time would increase the risk of supply disruptions," warned the supervisory authority in a recent report. Therefore, "no closures of production facilities could be approved” for the foreseeable future in southern Germany.

Even when a plant can no longer be operated profitably, utilities cannot simply take such a plant off the grid. At the end of last year, the German Parliament put a stop to that. Any planned decommissioning must be announced at least 12 months in advance by the operators. This gives the Federal Network Agency the opportunity to examine the consequences of a shutdown for grid stability. If a power plant is classified as "systemically important", the Network Agency may order that it must be kept in operation for up to two years. For this, the power company has the right to a "fair compensation" by the network operator, which will be included in the electricity prices and be paid by the consumers. So, in extreme cases it will take up to three years before a provider may be able to shut down an uneconomic power plant.
 
 

4) Germany Tricks: UK Energy Companies May Shut Down Power Plants To Receive Subsidies
The Times, 25 July 2013

Tim Webb

The boss of one of Britain’s biggest energy companies has warned that the Government’s new plan to stave off the growing threat of blackouts could increase the risk of the lights going out.

Under the plan announced this month, the owners of mothballed power plants would be offered lucrative subsidies to rush them back into action during times of peak demand.

But Keith Anderson, the chief corporate officer of Scottish Power, said that energy companies could deliberately mothball plants that they would otherwise have kept open to make them eligible for the payments. This would cut Britain’s precariously thin spare generating margin even further.

“Please let’s not create the wrong signals in the market,” he said. “If you put in place a mechanism to encourage mothballed plants to come back on the system, then you are encouraging people to mothball plants. You have to think through very carefully the consequences. We need to have more detailed conversations to make sure we do not have unintended consequences and make the situation worse.”

Other power companies share Scottish Power’s concerns. National Grid, which is carrying out a consulation into the plan, admitted that many believed it amounted to “interference” in the market.

Mr Anderson wants the Government instead to bring forward its so-called capacity auctions, scheduled to start in 2018, which will pay energy companies to provide generating capacity available a long time in advance.

Full story
 

5) Green Germany: Coal Power Expanding, Green Energy Stagnating, CO2 Emissions Rising
Der Westen, 23 July 2013

German coal-fired power plants have been operating in full swing in the first half of 2013. Lignite and hard coal power plants and gas plants produced 12.4 percent more power than last year. In contrast, wind turbines and solar panels delivered less electricity. German greenhouse gas emissions continue to rise.
 
Standorte Kraftwerke in Deutschland im Jahr 2011, Quelle: Bundesumweltamt 2011, standortgenaue Darstellung der Energieerzeugung in Deutschland im Jahr 2011 entsprechend der Legendendarstellung
Germany’s Booming Coal Power Plants,  © Federal Environment Ministry 2011 

Lignite and hard coal power plants and gas plants delivered 12.4 percent more power in the first half years, according to figures by the Federal Association of German Electricity Association (BDEW). As a result, German greenhouse gas emissions will rise again in 2013, just as they did in 2012. Already in 2012 lignite and hard coal power plants had emitted approximately four percent more CO2. The data for the first half year now show that this trend will significantly worsen.

The reason is the decline in carbon prices at the exchanges, which make the operation of coal plants more economical. EU attempts to reform carbon trading and to stabilize prices were thwarted by the opposition of Germany, among other states.

Solar power generation stagnant

The electricity generated by the renewable energy sector, however, decreased from January to June: The main reason was that the wind was blowing less strongly compared to last year, especially since the beginning of the year. Thus almost ten percent less electricity was generated. The long winter hit the solar power generation: Although the installed capacity was expanded by about 25 percent in 2012, the electricity generated remained on the same level.

Translation Philipp Mueller

Full story
 

6) Green Germany: Merkel’s 4 Billion Energy Handout For Big Industry At Risk
Bloomberg, 17 July 2013

Stefan Nicola & Naomi Kresge

Exxon Mobil Corp., Bayer AG and Linde AG are among companies at risk of having to repay billions of euros in German aid as Chancellor Angela Merkel clashes with Europe’s antitrust regulator over rebates to companies that use the most energy.

A total of 1,691 companies or units are benefiting from power fee waivers worth about 4 billion euros ($5.3 billion) this year, according to data from German authorities. While the European Commission is examining whether the waivers constitute illegal state aid, Merkel said they’re key to safeguarding the competitiveness of Europe’s biggest economy.

“Germany needs energy prices that are competitive,” Merkel said at an event in Cologne yesterday marking the 150th anniversary of drug maker Bayer, whose plastics unit gets the waiver at four different locations, according to the Federal Office of Economics and Export Control. Germany will “fight resolutely” in Brussels for the waivers.

The waivers free companies from paying the full fee to support the country’s clean-energy expansion. Merkel’s government is expanding wind and solar power to make up for the generation capacity lost when Germany shut its nuclear stations two years ago.

 
7) House Of Lords Launches Inquiry Into Economic Impact Of Shale Revolution

House of Lords Economic Affairs Committee

The Economic Impact on UK Energy Policy of Shale Gas and Oil

The House of Lords Economic Affairs Committee today launched a new inquiry into the Economic Impact of Shale Gas and Oil on UK Energy Policy. The deadline for submitting written evidence is 30 September 2013.

The Committee will consider the possible impact of shale gas and oil on the UK economy following evidence from the United States that suggests that shale gas can be extracted using current technology and make a substantial impact on the national economy and in the areas where production is centred.

Questions

The Committee are seeking evidence on:

* How much scope is there for shale gas and oil to be used in the UK? Over what timeframe?
* How will the costs, including those on the environment, of accessing the UK’s shale gas and oil compare to those of other energy sources?
* What is the potential impact of shale gas and oil on the local economies in areas where development is possible?
* What forms of electricity generation is shale gas likely to displace and by how much?
* What impact will shale gas and oil have on household energy bills?
* What effect will the use of shale gas and oil have on carbon emissions compared to other combinations of energy sources?
* Will shale gas and oil increase UK energy security?
* What lessons can be learnt from the US experience of shale gas and oil?

More information here
 


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