IEA: Europe's Thermal Power Sector 'Uninvestible'

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland) - The European thermal energy market has been branded 'almost uninvestible' by the chief economist of the International Energy Agency (IEA).

Despite Europe needing 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, the thermal sector is not attractive to investors, warned chief economist, Fatih Birol. Speaking at the annual energy conference of the Confederation of British Industry (CBI) in London recently, Birol claimed that thermal energy has a crucial role to play in Europe's energy mix as it moves to more renewable energy.

Birol has been continuing a high-profile series of talks at key European energy events in order to energise the European Union (E.U.) into overhauling its power sector. Today, a combination of low carbon prices under the Emissions Trading System (ETS), low electricity demand and cheap coal imports has led to a growing number of modern, gas-fired plants being mothballed.

"The appetite for building thermal power plants in Europe is almost zero," Birol told a Friends of Europe event in Brussels recently. "There is a risk of blackouts if the right decisions are not made soon."

Birol said that the current conditions will prevent Europe from building the estimated 100 GW of thermal plants needed to secure energy supplies for the region. Wholesale prices for electricity, according to Birol, are around $20 per megawatt hour (MWh) below cost-recovery levels for companies running power plants.

"Wholesale prices need to go up. We need a 20% rise in prices," Birol said in a report from Interfax Energy. "Eighty percent of thermal power plants will retire over the next 20 years. This is a window of opportunity."

Germany is a prime example of off how thermal-plants are losing money and are being mothballed as demand shrinks and wholesale prices continue to drop. All of the major operators there have mothballed thermal plants to offset losses in the past year.

Last month Energie Baden-Württemberg AG (EnBW) (Karlsruhe, Germany), wrote down the value of its power plants by €1.5 billion ($2 billion), warning that earnings from its conventional powers plant fleet - especially coal-fired plants - would be eroded by weak prices. Last summer, it announced it was shutting down four conventional power stations claiming that they were too expensive to run. For additional information, see July 17, 2013, article - EnBW to Shut Four German Power Plants.

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