E.ON Shutting 'Unprofitable' German Gas-Fired Plants

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland) - The rise of renewable energy and low wholesale electricity prices has forced E.ON AG (PINK:EONGY) (Dusseldorf, Germany) to announce the closure of two modern gas-fired plants in Irsching, Germany.

In recent weeks, Industrial Info reported on the possibility that E.ON would shut the plants due to their unprofitability. For additional information, see March 13, 2015, article - E.ON May Shut New Gas-Fired Plant in Germany.

E.ON claimed that the plants offer 'no economic prospects' in the current climate. The company said that it has informed the Federal Network Agency of its plan to shut down its wholly-owned Irsching Unit 4 plant immediately. Unit 4 is a combined cycle gas turbine (CCGT) plant with a generating capacity of 550-megawatts (MW), which was commissioned in 2010 and had a high claimed efficiency rating of over 60%.

E.ON, along with its partners, which own the Irsching Unit 5 plant, have informed the Agency of their intention to shut the plant on April 1 2016, when their contract with the network operator expires in March of that year. Unit 5, consisting of two smaller gas turbines and one steam turbine, has a capacity of 860 MW with a claimed efficiency rating of 58%.

Irsching 4 and 5 have operated during the past two years under a contract between the owners and the network operator, receiving a guaranteed amount to keep them available. Due to an increased amount of renewable energy -- mainly solar and wind -- getting priority access the grid, the plants have not been run long enough to be profitable.

"Due to the increase in subsidised renewables feed-in and low wholesale power prices, the units can no longer supply merchant power profitably," E.ON stated. "Irsching 4 and 5 supplied no merchant power at all in 2014 and were only dispatched when they were needed to stabilise the network in southern Germany in response to temporary fluctuations. [We] receive contractually stipulated remuneration for the instances when the network operator dispatches the units. This remuneration, which is just enough to cover the cost of operation, is based on general regulatory practice. When the contract expires, the two CCGTs would have to cover all their costs by supplying merchant power. Low wholesale prices and rising renewables feed-in, however, render this impossible. To avoid operating the CCGTs at a loss, their owners see no alternative but to notify the relevant parties of their plans to shut them down."

E.ON and its partners argued that the current system of remuneration, especially for plants that are deemed vital to stabilising the country's electricity supply, must be revised and improved to take into account the costs associated with building modern gas-fired plants.

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