* Regulator, network firm, E.ON seek solution for Bavaria
* Unprofitable power blocks envisaged for reserve option
* No timing for solution given, grid customers would pay
* Companies decline comment
By Vera Eckert
FRANKFURT, April 18 Germany's energy network
regulator has stepped in in an attempt to keep two gas power
units open to ensure reliable power supply in the wake of the
deep upheaval caused by the nation's strategic shift away from
The Federal Network Agency said on Thursday that talks were
underway with utility E.ON on how to keep its two unprofitable
blocks in Bavaria state online, as the need to maintain grid
stability makes their further operation a public issue.
"There are talks between us, E.ON and grid company TenneT
about the possible inclusion of the Irsching 4 and 5 generation
units into reserve status," said a spokeswoman for the
Bonn-based Federal Network Agency.
"There has not been a conclusion as yet," she added.
E.ON has said that weak demand and low wholesale
prices could force it to mothball the modern gas-fired power
blocks Irsching 4 and 5 unless they receive payments in return
for offering reserve power functions.
The case has a political dimension as after Germany's
decision to pull out of nuclear faster and to hold on to a
subsidy-driven green energy expansion, the energy system is
turned upside down, causing margin pressure for utilities and
posing supply risks.
Grid firm TenneT is charged with maintaining power supply in
industry-heavy Bavaria and reports to the regulator, which
supervises the arrangements.
Both an E.ON spokesman and a TenneT spokeswoman declined to
comment on the issue on Thursday.
E.ON has threatened to apply for closure of a number of
plants due to a collapse of achievable power prices for its
output and relatively high buying-in gas costs, which are linked
to the price of oil.[D:nL5N0B08GI]
Also, green power supply takes precedence on transmission
grids. This cuts minimum running hours needed to justify returns
for some conventional power stations conceived to run 24-hours.
E.ON has put necessary payments for three year-old Irsching
5 at 100 million euros ($130 million) a year. Under energy laws,
it is not allowed to unilaterally go ahead and shut the plant.
TALKS FOCUS ON MONEY
The regulator already has TenneT on board, sources close to
the talks said. It not only agrees that block 5 of 846 MW is
needed locally to guarantee grid stability, but that this also
extends to block 4 of 550 megawatts (MW) capacity, which started
A huge E.ON nuclear reactor nearby at Grafenrheinfeld, is
slated to shut in 2015 under the nuclear exit law.
The current talks at the regulator focus on modalities of
the payments which E.ON would receive, as this determines how
much will have to be paid out by TenneT and recovered via a
charge borne by customers, the spokeswoman said.
Plants in reserve are paid just to stay open but are told
that the plant must not run commercially for five years.
An alternative, redispatch, would allow the operator to
offer the output commercially but reap higher payments if there
is proof that it was needed to ensure grid stability.
Irsching 3, an older gas-fired plant of 415 MW is already
assigned to so-called cold reserve for winter months.
E.ON owns the Irsching plants except for block 5, where it
has a 50.2 percent stake and shares the remainder with three
German city utilities, of Frankfurt, Nuremberg and Darmstadt.
($1 = 0.7668 euros)
(Editing by William Hardy)