Monday, April 8, 2013

Mixed Messages from German Utilities' Planned capacity additions

Industry group BDEW has released data, along with a statement, on planned power generation projects.  Of the 37,755MW of capacity planned, by utilities and inclusive only of projects over 20MWe, 0 MW are solar, and 0 MW are on-shore wind.

Created from Data from BDEW (Page 2 here)
Germany's utilities have plans to build some 76 large power generation projects with a combined capacity of around 38,000 MW by 2020, the energy industry lobby group BDEW said Monday.

However, due to unstable political framework conditions, the uneconomic outlook for gas-fired power generation as well as public resistance to new coal-fired power plants, almost a third may be cancelled, the BDEW said.

"A new ice-age is threatening the construction of new power plants," BDEW chairwoman Hildegard Mueller said in the statement. "In particular, plans for projects beyond 2015 have been put on hold, even if they already have the necessary permits. Almost a third of all projects now have an unclear timing as investment conditions are currently just too uncertain."
Continue reading at platts

The first graphic I added breaks down the 11,190MWh of capacity (30% of planned total) that is either constructed and in trial operations, or under construction. The other 70% are not likely to get constructed in the current economic and incentive environment, as Bloomberg recently indicated in, Merkel Losing Allies in $700 Billion Shift to Renewables:
EON SE (EOAN) and RWE AG (RWE) (RWE) are reducing clean-power spending for the first time since 2009 to cut a combined 69 billion euros ($88 billion) in debt and curb costs. That limits funds for offshore wind energy, the centerpiece of Merkel’s plan to replace all atomic reactors by 2022 and triple renewables’ share by 2050...
“The entire energy switch has derailed,” Marc Nettelbeck, an analyst at DZ Bank AG, said this week by phone from Frankfurt. “The difficulties connecting offshore wind farms to the power grid reduces their profitability and renders the original investment calculations of utilities invalid.”
Created from Data from BDEW (Page 2 here)
The planning for the other 70% of the BDEW capacity plans - the ones not yet committed to - have a much different composition than the projects being constructed (65% coal).  83% of the plans are for the wind/storage/gas combination frequently pictured as the future.

That's certainly questionable, as the economics for natural gas plants are so poor EON is looking to close a natural gas-fired power station that only entered commercial operations 3 years ago (here).

The BDEW release - well, the Google Translate version of the release - quotes Hildegard Müller, Chairman of the Executive Board of the Association of Energy and Water Industries (BDEW):
"In the short term will go though several new conventional power stations and offshore wind farms to the grid makes the capacity situation is temporarily better, but as of 2016 have the power plant design work to clear this will therefore bring no lasting relaxing effect for the market and security of supply we.... but need further secured capacity to compensate for the fluctuating input from renewable energy sources when necessary."
The BDEW message seems to be that if the next German coalition government wants offshore wind, and support for the small-scale solar and onshore wind projects that continue outside the sphere of these BDEW figures, offshore wind needs to be made attractive (probably by the government picking up the tab on connection), and capacity payments need to be initiated to allow profitability for the natural gas-fired, and I assume the pumped storage, facilities.

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