June 25, 2014 / 3:52 PM / 3 years ago

UPDATE 1-Germany's Gabriel targets plan for loss-making power plants

* Says hopes to implement plans 2015/2016

* Stresses the scheme will not be about hand-outs

* Commits to more energy reforms soon (Adds quotes, background, context)

BERLIN, June 25 (Reuters) - German Economy Minister Sigmar Gabriel said on Wednesday he will introduce a market for spare power capacity which will help keep loss-making coal- and gas-fired power stations stay open on standby for when wind and solar plants are not producing.

He said he hoped to implement the plan from 2015/2016, and in any case before 2017, when under current reforms green power will switch to an auction-based system rather than receiving funds regardless of whether there is demand for the power.

There are concerns in Germany that as the country switches from nuclear energy to renewables, it could face electricity shortages at times of unfavourable weather for wind and solar power, at the same time as reliable back-up capacity is being forced to shut because power prices are not profitable enough.

Experts agree that although the German power market is technically still in a supply surplus, it faces the possibility of regional blackouts in the coming years.

Utilities warn they will shut large parts of their conventional power fleet as a result of a crisis partly arising from a glut of subsidised green power, but also slack demand.

Critics see the companies’ demands as calls for state hand-outs for a troubled industry, but Gabriel said it was part of a necessary integration of the two systems.

“This is not about subsidies but about maintaining power supply security while we are expanding renewables,” Gabriel told the BDEW energy association’s annual congress in Berlin.

“We need a market-based solution for back-up capacity.”

The parliament is due to pass Gabriel’s first energy reform package on Friday following last-minute changes made in response to objections from the European Commission.

A number of capacity market models have been floated over the past two years, but Gabriel made specific mention of proposals both from the BDEW last autumn and a one from local utility association VKU.

BDEW has said its plan would not generate more bureaucracy but be market-based, allowing storage operators, virtual plants and flexible renewable units to compete. (Reporting by Alexandra Hudson and Vera Eckert, editing by David Evans)

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