* Minister to seek talks this year, regulator supports this
* Utilities want support for keeping capacity online
* E.ON CEO says confident government will act
* France set to create capacity market
* Critics say support could undermine free market
By Vera Eckert and Christoph Steitz
FRANKFURT, May 20 There are signs of hope for
German utilities looking for help to keep loss-making plants
open as Economy Minister Sigmar Gabriel drives energy reforms
and the regulator signals his support for lifting the sector out
The government wants utilities to keep gas- and coal-fired
plants open to ensure power supply when there is a lull in
variable wind or solar energy.
But because most of these plants lose money, RWE
and other utilities have called for the creation of a so-called
"capacity market", which would involve the government raising
funds to pay operators to keep such sites open.
Gabriel announced a first round of energy reforms last month
and signalled he would hold talks with utilities regarding a
capacity market in the second half of the year.
Jochen Homann, chief of Germany's Federal Network Agency
(Bundesnetzagentur), also recently came out in support of
discussions, having been sceptical about subsidising capacity in
"I see uncertainty in the market and the need for clarity
(about the shape of a capacity market)," Homann said.
"We would welcome it if we could complete discussions soon
as many investors have taken a wait-and-see approach, and we
would like to break up that attitude."
Homann has warned that energy supplies could become tight if
more plants are shut in some regions of Germany and grids are
not expanded in time.
Utilities RWE, E.ON, Vattenfall and
EnBW say a capacity market is needed to safeguard
Other European states are also looking at the idea, with
France's capacity market set to open in the winter of 2016-17.
Subsidies have fuelled rapid expansion in renewable energy
in Germany, hurting conventional power stations.
Wholesale forward power prices, at 34 euros per
megawatt hour, are half of where they were in 2008 and well
short of the approximately 60 euros required to run a
gas-to-power station profitably.
In contrast, renewable electricity is sold at government-set
prices irrespective of demand.
"I'm confident that the German federal government will soon
set a course that will enable conventional power plants to
provide a continuous, reliable backup for the intermittent
output of renewables," E.ON Chief Executive Johannes Teyssen
wrote in a letter to shareholders last week.
Industry groups such as BDEW and VKU also say utilities must
be rewarded for providing round-the-clock power.
"Without capacity markets, nobody will be able or willing to
invest in new power stations, as the costs can't be recovered,"
said Roland Vetter of energy fund and research firm CF Partners.
Germany's situation also reflects the fact it plans to exit
nuclear power by 2022, removing a source of "baseload" steady
power and therefore boosting the importance of gas- and
Yet setting up a capacity market in Germany would be
expensive, with annual costs estimated at 3-5 billion euros, or
up to a quarter of the combined core earnings at the top three
There is also opposition from the trading community and
($1 = 0.7289 euros)
(Additional reporting by Henning Gloystein in London and Geert
de Clercq in Paris; editing by Jason Neely)