Germany faces higher electricity prices and very serious power supply shortfalls

Thursday, 19 November 2009
imagee/GERMA.jpg Germany faces higher electricity prices and power supply shortfalls if the economic downturn prevents enough new power plants being built, says Reuters.

Power generators looking to expand must also grapple with public opposition to coal over its carbon emissions, and delays to a defined future for nuclear energy's as the new government starts to work out its energy policy.


The problem has been put off in the short term as big companies like E.ON and RWE are not eager to spend money in the face of slumping demand. Industrial consumer purchases of power in the year to September slumped by seven percent in Europe's biggest economy.


But as signs of a German recovery appear, so too are projections for rising power demand and fears there could be supply gaps and crippling prices, if the slowdown in investments is not halted.


"We could easily risk running into power capacity bottlenecks in the coming years when the economy recovers and electricity demand rises again," said Florian Haslauer of the A.T. Kearney consultancy.


"This is because projects are being delayed as cash flows ease when consumption and prices sink, and as credit conditions are unfavorable."


"Then maybe five years down the line those years without investment we see now will be missing and cannot be repeated," Haslauer said.


He added that spending on new generation plants in Germany this year and next was probably 20 percent below what had been planned prior to the finance crisis.




Energy agency Dena that reports to the government on power use and efficiency has renewed warnings of possible power supply shortfalls by 2020 at the latest and figures from energy lobby BDEW also point to project delays.


The capacity of new coal and gas plant projects seen due to open by the year 2012 has now shrunk to 10,000 megawatts from 14,000 MW six months ago, BDEW data show.


According to this, the missing 4,000 MW may be made up in the 2013 through 2016 period, adding to 9,000 MW of known projects penciled in to materialize in those years.


But a large number of those may face long-drawn out controversies due to local opposition to coal as a dirty fuel.


RWE executives last week said they have had to put on hold plans for a 450 MW coal plant at Huerth, which was meant to be using a novel carbon capture and storage (CCS) process by 2014.


It cited an unsure legal framework for CCS, which if resolved would ensure coal burning will continue, as it separates off CO2 and buries it underground.

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