German nuclear exit limits power competition: regulator

FRANKFURT Tue May 31, 2011 7:11am EDT

FRANKFURT (Reuters) - Competition in the German power market will be hampered for at least another two years until new power stations partially replace eight plants shut down by the government, the country's network regulator said.

The government decided on Monday to phase out nuclear power in Germany, Europe's largest power market, by 2022 due to public opposition after the disaster at Japan's Fukushima power station.

"Competition can only fully thrive once we have enough power grids and once the shutdown nuclear power plants have been replaced by new conventional generation capacity," Matthias Kurth, president of the Federal Grid Agency told Reuters.

The permanent shutdown of eight nuclear power stations means that a very regulated power market will continue in its current state until new plants come online in 2013, Kurth said.

Since the shutdown started in March, operators of the four German high-voltage power grids are more frequently having to juggle the output from the remaining stations to maintain the stability of the whole network, he said.

Because there are fewer stations to choose from, that leads to situations in which cheaper facilities have to be disconnected from the grid while more expensive ones supply power, Kurth said.

"If the planned 10 gigawatt in generation capacity can be built by 2013 and the power grid is expanded accordingly, the situation might become more normal again and we might get a more competitive situation," Kurth said.

Any increase in competition is limited however, as most of the new generation capacity is built by the four dominating players on the German power market, E.ON, RWE, EnBW and Vattenfall's German unit.

The competitive situation after Monday's decision might also be better than it was under the previous energy policy of the government, which gave nuclear power plants 12 years in additional lifespan.

The cartel office as well as hundreds of German local utilities had criticized that decision for cementing the oligopoly of E.ON, RWE, EnBW and Vattenfall for decades.

(Writing by Peter Dinkloh; Editing by Erica Billingham)

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