Germany cancels plan to subsidise new fossil fuel-fired electricity plants
The German government will not continue with its plan to subsidise the construction of new fossil fuel-fired power plants by contributing up to 15% of the investment costs, it emerged on Monday.
But some utilities expect government decisions to provide clarity on the profitability of building gas-fired power plants to be taken this year.
Germany is facing a reduction in installed capacity in the second half of the decade because of its nuclear phase out, while investors hold back on building new power plants that could replace the decommissioning of old ones (see EDEM 23 April 2012).
However, Germany's plan to incentivise the construction of new cleaner, more efficient fossil fuel-fired plants by contributing up to 15% of the investment costs has been stuck in a deadlock since last year, because of a lack of political will to push carbon capture and storage (CCS) technology in Germany (see EDEM 4 April 2012 and see EDEM 2 July 2012).
EU rules only allow governments to subsidise the construction of new fossil fuel-fired plants if they utilise technology such as CCS.
On Monday, the final confirmation arrived as it was announced that this investment programme will not be realised.
"Against the background of the restrictive framework of European rules for investment subsidies into highly efficient power plants... the original plan of a plant subsidy programme... will not be continued further," the government said in response to a question from a member of the lower house of parliament, Oliver Krischer, from the Green party, which Krischer published on his website on Monday.
The creation of alternative investment programmes could mitigate not being able to proceed with the plan, the government added. The government said that it has created "alternative instruments to set short-term incentives for new production assets", in its reply.
One measure is the increase in subsidies for combined heat and power plant (CHP) plants from July 2012 (see EDEM 18 June 2012). A credit programme run by state-development bank KfW to help municipal utilities invest in new gas-fired power plants, which is running since June, is another, the government explained.
Investment clarity
Separately on Monday, the network of municipal German utilities Trianel said it expects the government to take measures this year to ensure the country's security of supply, which will have impact on the profitability of its planned 1.2GW gas-fired CHP plant in Krefeld-Uerdingen, west Germany. Faced with the market being distorted through subsidy payments for renewable generation, Germany is discussing how the future energy market should be designed (see EDEM 23 April 2012). The discussion about the design of the energy market or a strategic reserve will certainly play a role in Trianel's plant profitability assessment, the utility said.
In addition, Trianel is assessing options which arose through the amended CHP law, the utility added.
"It is currently still [an] open [question] if it is possible to operate the planned CHP plant in Krefeld on an economically viable basis," said Martin Hector, the plant project director. The plant is due to come on line in 2016 and is to provide power to the public grid and heat to the chemical business park nearby (see EDEM 19 July 2011)."Probably by the end of the year we will have obtained a detailed assessment of the profitability of the project," added Hector.
BDEW on capacity shortfall
Also on Monday, Germany's energy industry lobby association, BDEW, said it has presented an initial draft of a working paper to the economy ministry, which proposes how to ensure the security of supply this winter. Germany's utilities are asking for financial aid to keep strategically important but unprofitable power plants on line (see EDEM 9 August 2012).
The draft would only propose a potential solution for this winter. For the coming years in which tight capacity may also exist, a different solution is required, BDEW said. MD
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