Germany: Gas Power Falls as Renewable Energy Surges

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Gas-fired power continued to decline in Germany during the first half of 2014 as renewable energy posted another record breaking period.

Renewables, comprising wind, solar, biomass and hydro power, accounted for 31% of the electricity produced in the first seven months of 2014. Collectively, they produced more than 81 terawatt hours (TWh), a jump of 11 TWh from the same period last year. Solar power plants increased their production, compared with the first half of 2013, by 28%, while wind energy grew by about 19%. In June solar farms produced twice as much electricity as wind turbines, according to the latest figures from the Fraunhofer Institute. In the first half of the year the combined generation from solar and wind power stood at 45 TWh, or 17% of the electricity mix.

After hydropower, gas produced the least amount electricity in Germany's mix at 18.3 TWh for the first seven months. This was down almost a third on the same period last year and continues an alarming trend of utilities idling modern gas-fired plants due to a number of factors. These include competition from subsidized renewables, cheap coal imports and high gas prices. Gas-fired power production showed the biggest drop this year, and compared to the first half of 2010, production from gas power plants has been halved.

Brown coal-fired plants supplied the most electricity at 80.6 TWh, followed by black coal-fired plants at 57.8 TWh for the first half of the year, down 4.4 TWh and 7.6 TWh, respectively. Coal-fired power accounted for almost 46% of all power generated.

"Brown coal-fired power plants have produced about 4% less compared to the record year of 2013," the Institute stated. "However, the production was at the high level of 2012 and about 5% above the average of the last 10 years. The production of hard coal-fired power plants was about 11% less than in the record year of 2013, but was on a similar level as in the years 2010 to 2012."

The output from nuclear power plants stood at 51.1 TWh--or almost 17% of the total--remaining largely unchanged in recent years.

Earlier this month, Germany's second largest energy company, RWE AG (FWB:RWE) (Essen, Germany), announced further plant closures, in response to weakening demand and plummeting wholesale electricity prices that are making some plants too expensive to run. The company claimed that wholesale electricity prices in several of its German markets have dropped by 50% in the past three years.

"The expansion of renewable energy and the significant decline in wholesale electricity prices have caused the utilization and margins of our power plants to deteriorate significantly," said Peter Terium, the chief executive officer of RWE. Many of these stations are incapable of covering their operating costs, forcing us to take them offline either temporarily or permanently." For additional information, see August 15, 2014, article--RWE Expands Plant Shutdowns as Europe Steers Away from Coal, Nuclear.

In July, Industrial Info reported on how the International Energy Agency (IEA) branded the European thermal energy market as "almost uninvestible." The IEA's chief economist, Fatih Birol, said that the thermal sector is not attractive to investors despite the fact that Europe needs up to 100-gigawatts (GW) of thermal power in the coming decade to back-up the growing amount of renewable energy and the closure of older plants. Wholesale prices for electricity, according to Birol, are around $20 per megawatt hour (MWh) below cost-recovery levels for companies running power plants. For additional information, see August 15, 2014, article--IEA: Europe's Thermal Power Sector 'Uninvestible'.

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