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Hungary CHP plants to shut on low prices

31 Mar 2011 15:38:00 | edem

Hungarian utility AES will close down its 90MW Tiszapalkonya coal-fired combined heat and power (CHP) plant and 71MW biomass cogeneration plant in Borsod.

A source from AES told ICIS Heren that the decision to shut down the plants was not made as a result of the Hungarian government slashing the subsidies for CHP plants as of 1 July.

"Those two plants are closed because of the current market conditions," the source said. "The wholesale prices have been very low and these plants can't compete with such prices. In addition to that, they are very old and inefficient."

Prices on the Hungarian wholesale power market have rocketed recently in contango with the German curve, but the source said that the values have not been high for long enough to justify the plants staying online.

Hungarian CHP plants were eligible for subsidies of (Ft) 32,000/MWh (€120/MWh) in 2011 under the green feed-in tariff system, but the government recently decided to scrap the support scheme (see EDEM 23 Mach 2011). Some market participants have been concerned that this will force generators to shut CHP plants down.

"These power plants have never been [exposed] to the open market, therefore they are facing both financial and market access problems," one Hungarian dealer said (see EDEM 23 March 2011).

But the source from AES did not lend support to these concerns, saying that the subsidy cut was not a big factor in the decision to shut down the Tiszapalkonya and Borsod plants.

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