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Energy

UPDATE 1-E.ON casts doubt on Irsching plant beyond March 2016

* Utilities losing money on gas-fired plants

* Irsching kept open in 2013 under “one off” deal

* Government needs “base load” power from such plants

* E.ON set to close nearby nuclear plant (Adds comments from regulator, government, context)

FRANKFURT, March 6 (Reuters) - German utility E.ON is unsure about the future of its Irsching power plant in Bavaria beyond March 2016 given a crisis in the sector that has pushed many gas-fired plants into loss.

“The economic perspective of the gas-fired plant in Irsching is extremely challenging. Changes in energy policy have pushed it to the edge of the market in a way that makes it barely possible to recover costs,” an E.ON spokesman said.

E.ON is considering idling the plant, German broadcaster ARD reported on Friday.

Germany’s gas-fired plants are being squeezed by cheaper coal-powered units and expanding, subsidised wind and solar generation.

Yet there’s a need for the steady, so-called “base power” that gas and coal units due to German government plans to shut down all nuclear reactors by 2022.

E.ON’s own Grafenrheinfeld nuclear plant, which serves big industry in southern Germany, will shut in May.

Utilities have called for state compensation and warned of potential supply risks if they shutter loss-making gas-fired plants.

In April 2013 a deal was struck between E.ON and grid operator TenneT, approved by the regulator, under which it kept open the Irsching 4 and 5 gas-fired blocks in return for an annual double-digit million euro payment for each block for keeping them available for power.

The two blocks were put under a so-called redispatch agreement between April 2013 and March 2016. That agreement has since been called a one-off.

Irsching 4 is fully owned by E.ON while Irsching 5 is part-owned by local utilities Mainova, N-Ergie and HSE.

Under German state rules, should E.ON wish to close the blocks for good after March 2016, it must notify the regulator this month to provide the required 12-month advanced notice.

Utilities cannot unilaterally close plants as they may be deemed necessary to secure network operations.

A spokesman for Bonn-based regulator Bundesnetzagentur said his agency had not yet received an application for closure from E.ON.

German green energy subsidies for low-carbon wind and solar energy generation have sent wholesale prices and generation margins sharply lower.

Prices are currently trading near 11-year lows.

A spokeswoman for the Economy Ministry in Berlin said the ministry did not see any risks to power supply security but said the discussion highlighted the importance of building power transmission lines from the north to the south.

Bavarian politicians, while needing renewable energy from the north, have questioned the new lines, reflecting some voter opposition to building them. (Reporting by Christoph Steitz and Vera Eckert in Frankfurt, Tom Kaeckenhoff in Duesseldorf and Markus Wacket in Berlin; editing by Jason Neely)

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