Decision to mothball 417MW German gas-fired power unit reversed

Source: Heren

2016/06/28

The owners of Germany’s 417MW Cuno Herdecke H6 gas-fired power generation unit have decided to keep it operational to produce power occasionally during hours of tighter supply.

A slight improvement in market conditions encouraged regional utility Enervie, which owns 50% of the plant while Nordic utility Statkraft owns the rest, to reconsider a previous decision to mothball the unit.

The unit is likely to produce power when prices on the short-term wholesale electricity market are high enough for it to cover operating costs. This running strategy will limit short-term price spikes that could occur when wind and solar power are low.

The unit has already been producing occasional volume in recent months while its owners have been mulling its future. At the start of the year, Enervie and Statkraft had planned to close the unit after grid operators said they no longer required it for network stabilisation purposes (see EDEM 11 January 2016).

“Regular continuous operation is no longer possible with the operational concept that we now envisage and related staff reductions,” Enervie said on Tuesday.

The unit, in Germany’s North Rhine-Westphalia federal state, was commissioned in 2007.

Gas-fired generation prospects

Enervie had decided in April 2015 to exit conventional power generation. But Tuesday’s decision to keep the unit online does not mean a change in this strategic direction, the utility said.

Even though German spark spreads, an indicator of profit margins for gas-fired capacity that do not include the cost of carbon, have improved recently, the economic prospect of continuous gas-fired generation remains well out of sight.

The German Calendar Year 2019 Baseload clean spark spread, which takes into account the cost of emissions, was negative at -€7.18/MWh on Monday.

Gas is a more expensive fuel than coal, but gas-fired plants have greater flexibility, hence they are better placed to balance out fluctuations stemming from Germany’s increasing renewables capacity.

The few companies that plan new gas plants in Germany see profit opportunities mostly on short-term markets or as reserve capacity. Reserve capacity cannot operate on the free market.

Most upcoming larger gas-fired plants that are due to participate on the market will also produce heat because co-generation receives subsidies in Germany.

laura.raus@icis.com