Uniper SE is preparing to switch on more natural-gas plants as higher costs for carbon allowances shifted the economics of the power generation business away from coal.
\nGas plants also are benefiting both from a slump in the price of the fuel. Uniper, one of Europe\u2019s largest utilities, will bring back on line as much as 3.5 gigawatts of gas plants that were mothballed when market conditions were less favourable. That\u2019s almost a third of its gas-plant capacity.
\n\u201cCarbon markets have shown they work,\u201d chief executive officer Andreas Schierenbeck said in an interview in Bloomberg\u2019s office in Frankfurt. \u201cThis summer, carbon prices were very high and gas is very cheap, very competitive. The logic is clear: you need as much a double carbon certificates for coal than for gas.\u201d
\nThe remarks illustrate the latest shift in the ever-changing economics of generating electricity. While Chancellor Angela Merkel is moving to phase out the most polluting fossil fuels, emissions in Germany have actually risen in recent years as the government took nuclear plants off the grid, boosting the need for coal.
\nNow the government is seeking to remove both nuclear and coal plants from the nation\u2019s power supply, eliminating about half of Germany\u2019s power generation capacity. The rise in carbon costs has helped encourage that shift by making it profitable for utilities to switch on gas plants instead of coal.
\nThe move will help Germany reduce pollution. Natural gas emits as much as 55% less carbon dioxide than coal. While the government is seeking to spur renewables to meet its climate commitments, industry executives, energy forecasters and investors say that more gas will be needed for the time being. Gas plants can help balance the grid until there\u2019s enough wind, solar and battery capacity to ensure supply day and night and on breeze-free days.
\n\u201cWith the nuclear and coal exit, our gas plants will have to produce more,\u201d said Schierenbeck. \u201cWe need more gas for power generation as a big part of our power plants is on the reserve, and we will probably take them out.\u201d
\nCarbon permits under the European Union\u2019s emissions-trading system, the world\u2019s biggest cap-and-trade programme, were at \u20ac23.70 a tonne ($26.14) on Friday, 20% higher than a year ago. Analysts and traders expect that annual demand will outweigh supply at least until the mid-2020s.
\nGerman gas prices are 40% lower than a year ago. Weighing on prices are abundant supplies arriving both by pipeline and in LNG tankers. That has pushed storage levels to near capacity and well above the average for the past five years.
\nUniper has the capacity to generate 10 gigawatts of power from natural gas in Germany. It will be one of the companies hit quickly by legislation to phase out coal in Germany. Some versions of the draft bill suggest the country will shut down 5 gigawatts of hard coal capacity by 2022.
\nUniper owns more than 3 gigawatts of power plants that burn hard coal and is building another 1 gigawatt-plant in western Germany. It expects to get approval from the government to start operating that facility, named Datteln-4.
\nThe new power unit has not entered service yet due to ongoing structural problems with its boiler. Uniper now expects to start it in the middle of next year. The company has argued that the plant should open despite Germany\u2019s plan to exit coal.
\n\u201cDatteln 4 will probably be the last new coal power plant we will see in Germany,\u201d said Schierenbeck. \u201cI would guess it would be also true for Europe. I have the feeling there\u2019s understanding from the government that it makes sense to keep the newer and most efficient instead of the older and less environment friendly.\u201d
\nUniper is Europe\u2019s fifth largest greenhouse gas emissions polluter in the power sector based on 2017 data, according to Sandbag, a climate change think tank in London.<\/p>\n","protected":false},"excerpt":{"rendered":"
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