Austrian gas-fired plants make profit on electricity balancing role

More frequent requests from transmission system operators (TSOs) to provide electricity for balancing helped EVN increase its thermal generation and revenues year on year, the Austrian energy utility said on Thursday.

The need for balancing electricity is increasing in the German-Austrian price zone due to growing share of volatile renewable energy generation.

The growth of renewables on the back of subsidies has pushed wholesale electricity market prices so low conventional generation plants are struggling to make a profit. But the growing need for balancing electricity can provide a lifeline to some gas-fired plants.

“This year for the first time we really had several requests for balancing energy,” said a spokesman for EVN.

Winter reserve

A couple of years ago, the company’s 775MW Theiss and 455MW Korneuburg gas-fired plants in Austria were successful at Germany’s winter reserve tender. The plants were contracted by the TSO TenneT to provide electricity to keep the German power grid stable in winter.

Now the two plants have secured their place in the reserve for the next three winters.

Germany’s winter power reserve requirements have spiked due to its ongoing nuclear power phase-out, increasing renewable capacity and insufficient domestic transmission capacity (see EDEM 5 May 2015).

At times when they are not needed by TenneT, EVN’s two plants provide balancing electricity for the Austrian power grid if requested by the country’s TSO APG.

The remuneration received for providing balancing electricity enables EVN to make a small operating profit from keeping the plants on line.

Phase out

With Germany’s nuclear power phase-out progressing, wholesale power prices might increase to an extent that the plants can return to full operation, the spokesman said.

Germany intends to close all its nuclear power plants by the end of 2022.

EVN does not plan to build any new thermal power plants in the short and medium term as their prospects would be too uncertain.

However, some companies think that the provision of balancing energy might be a business model for new gas-fired plants. Power plant developer PQ Energy said in May it plans to construct three gas-fired plants in Germany with a combined capacity of 2.8GW. The plants would solely provide electricity for the country’s planned capacity reserve, which would be used when power supply falls short of demand on the short-term market unexpectedly (see EDEM 18 May 2015).

The municipal utility Stadtwerke Kiel sees revenue opportunities for its 200MW gas-fired combined heat and power plant on the balancing market once it comes on line in 2018 (see EDEM 14 May 2015).

Results

EVN’s thermal generation amounted to 1.9TWh in the first nine months of its 2014/15 business year, up 35% compared to the same period of 2013/14, its interim results published on Thursday show. The main reason for higher thermal generation was EVN’s 725MW hard coal-fired Duisburg-Walsum power plant in Germany, which has reached full operations after being commissioned in December 2013.

The company’s renewable energy generation increased 17% to 1.3TWh. EVN’s nine-month earnings before interest, taxes, depreciation, and amortization amounted to €497m, up 39% year on year. laura.raus@icis.com