German winter electricity reserve will be met by existing plants – regulator

Germany’s energy regulator expects to an additional 545MW in electricity generation reserve required to ensure system security during the first quarter of next year will be met by contracting from existing power plants with no need to procure further capacity from less conventional sources, it told ICIS on Wednesday.

BNetzA confirmed an assessment carried out by the four German transmission system operators (TSOs) that an additional 545MW will be needed as winter reserve capacity, bringing the total required reserve for the period from October 2014 to March 2015 to 3.64GW.

The additional winter reserve capacity was identified after German utility E.ON said that it’s 1.3GW Grafenrheinfeld nuclear unit will reduce capacity from 20 January 2015 in preparation for final shut-down at the end of May 2015.

For most of the period the plant is due to run at around 1GW availability but this also includes a two-week maintenance period in which the plant will be completely off line, according to information from the four TSOs.

On Wednesday, BNetzA confirmed that, as things stand, the total previous amount of winter reserve capacity of 3.1GW has already been contractually secured.

Plant operators will be able to announce an interest in providing the additional 545MW by 15 October.

BNetzA said the additional amount will be covered by existing power plants. The law allows the regulator to call for the construction of new plants in case the capacity cannot be met by existing plants. But as it stands the regulator does not see the need to call for the construction of new power plants until the winter of Q4 2017 and Q1 2018 with no assessment made yet for the winters after that.

It remains to be seen if this assessment changes in the event there are more unforeseen plant closures.

Despite a stabilisation in forward German power prices, the average Cal ’15 Baseload ICIS closing price this year stands at just €35.20/MWh, and the low prices are insufficient to run many power plants profitably, let alone attract investment in new ones.

Reserve market

While the wholesale market remains a difficult business environment for plant operators, investors are preparing themselves to build plants exclusively to provide reserve capacity.

Zurich-based power plant project developer PQ Energy is banking on the German energy regulator in future needing to call for construction of new plants, which would likely involve some form of regulated capacity payment, in southern Germany where in general the grid situation is considered tense because of a loss in thermal power generation.

As it stands, the expected winter reserve capacity is forecast to nearly double to 6GW for 2015/16 and to 7GW by 2017/18, according to BNetzA.

PQ Energy could build three open-cycle gas turbine power plants with a combined capacity of 2.7GW, PQ Energy managing director Dominique Candrian told ICIS.

The locations were convenient from a grid connection point of view, Candrian said. At two locations in Bavaria nuclear power units are currently running: the 1.3GW Grafenrheinfeld unit which will come off line in May 2015 and the 1.3GW Gundremming B unit which will come offline in December 2017.

Candrian said PQ Energy could build a 1GW gas plant in Grafenrheinfeld and a 1.2GW power plant in Grundremming, as well as a 500MW power plant in Griesheim, within the City of Frankfurt.

PQ Energy is waiting for German energy regulator BNetzA’s winter reserve assessment which is normally published on a forward-looking basis in May. “It depends on the demand for reserve capacity,” Candrian said.

PQ Energy could build the plants within 18 to 24 months, he added. Two plants could be ready by the end of 2018 and the third one by the end of 2019, he said.

PQ Energy intends to operate the plants purely as reserve plants and not become active on the wholesale market. Martin Degen