Statkraft to close another German gas plant

Thu Mar 14, 2013 8:38am EDT

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By Vera Eckert

FRANKFURT, March 14 (Reuters) - Weak demand and generating losses have forced Norwegian power firm Statkraft to shut down another German gas plant, the company said on Thursday.

The move is more bad news for gas-fired generation, once feted for its relatively low carbon dioxide emissions but now struggling in a market heavily distorted by subsidies for renewables plants. Other utilities face the same problem.

Renewable power receives priority grid access and its operators are paid above-market subsidies, which has rapidly eroded profit margins for thermal power stations.

The 510 megawatts (MW) Robert Frank unit in Landesbergen, Lower Saxony will shut as soon as agreements on the job losses are completed with trade unions, the company said in a statement.

"The current market situation does not allow us to run older gas-fired power plants economically, let alone invest in new capacity," said Asbjoern Grundt, executive vice president for market operations and IT.

State-owned Statkraft just over a year ago shut a similar 430 MW plant at Emden, citing the dismal market conditions for gas generation arising from overcapacity, the fast expansion of competing renewable energy, low usage and low wholesale power prices.

On Wednesday, E.ON repeated it would wrap up by the end of this month discussion on whether or not to mothball Irsching 5, a very modern power station in Bavaria which only opened three years ago.

Statkraft's managing director for Germany, Juergen Tschzoppe, said the 40-year-old Robert Frank needed to shut because even its far more modern plants, Knapsack and Herdecke, were working below their potential.

"Robert Frank in theory would be a cheap back-up compared with other technologies but there is no state compensation for this function," he said.

German grid firms must declare a plant system-relevant - meaning it is needed for grid stability, for possible state payments to be approved for the operator, but this did not apply to Robert Frank, Statkraft said.

Plants threatened by closure may be too close to industrial consumers to risk shutting them and risking a system black-out, operators have said. The energy regulator therefore can rule that state fees are paid to keep them online.

In theory, gas-fired plants would be an ideal complement as they can be quickly activated if a lack of wind or sunshine curbs green power supply.

Statkraft said last month it would bring a brand new 430-megawatt (MW) gas-to-power plant near Cologne on line by mid-year, but worried about its profitability.

Power prices, now at 8-year lows, had been twice as high five years ago, when the decision to build it was made.

Gas-fired units also suffer versus coal-fired rivals because coal prices are low, as are those for carbon certificates which electricity generators must hold.

Utilities are calling on regional state leaders and the federal government to come up with ways to keep plants open.

But free-market liberal Economy Minister Philipp Roesler said if even the problem of over-subsidising green energy was now recognised, it would not make sense to throw even more support at conventional power.

"That could not be the sole solution for a future market design in Germany," he told parliament on Thursday. (Additional reporting by Markus Wacket, editing by William Hardy)

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