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Solar Doubling Drives Down German Power Prices: Energy Markets
2010-09-22 08:34:33.532 GMT
By Lars Paulsson
Sept. 22 (Bloomberg) -- Solar power may almost double in
Germany this year just as a natural gas glut sends electricity
prices to near five-month lows.
Capacity at plants converting sunlight to electricity in
Europe's biggest energy market will rise to 18,000 megawatts
from 9,786 megawatts, according to Bloomberg New Energy Finance
forecasts. No other power source will grow as fast, increasing
the glut that emerged after last year's recession, UBS AG said.
"What's new and special in Germany this year is the
devilish growth in solar," Sigurd Lie, a senior analyst at
Imarex ASA's Nena unit, an Oslo-based energy markets research
company, said in a Sept. 16 phone interview. "This has kept a
lid on prices even as you've seen an increase in demand."
German prices probably won't gain this year even with power
consumption forecast to rise 4 percent, according to Lie, 44,
who has tracked electricity markets for 12 years at Nena. Per
Lekander, UBS's head of global utilities research, said in a
Sept. 16 e-mail that profits at coal-fired plants, such as those
run by E.ON AG and RWE AG, the country's two biggest utilities,
may drop by more than 50 percent to as low as 2 euros ($2.66) a
megawatt hour in the next 12 months.
German power for next year, the European benchmark
contract, was unchanged today at 49.40 euros a megawatt hour,
according to broker prices on Bloomberg, down 10 percent from
this year's peak of 55.10 euros on June 21. E.ON spokesman Georg
Oppermann declined to comment on the UBS forecast while RWE
spokeswoman Annett Urbaczka declined to comment on trading
matters.
Gas Glut
The contract exceeded 90 euros in July 2008, as a six-year
rally in energy prices was coming to an end. Now, natural gas,
used to produce about 15 percent of Germany's electricity, is
also damping gains, said Sebastien Terryn, a risk manager at
Summit Energy Inc. in Waregem, Belgium.
"German power won't rise to anywhere near the record
levels of 2008 for at least another two years because of the
price link with natural gas, which remains a market with ample
supplies," Terryn said by e-mail on Sept. 17. Summit manages
about $20 billion of energy purchases annually for clients
including Healthcare Trust of America Inc.
U.K. natural gas for this winter is down 18 percent since
July 5 to 47.50 pence a therm today. A therm is 100,000 British
thermal units. The U.K. gas market, Europe's biggest, influences
prices elsewhere in the region.
Producers will bring 7,000 to 9,000 megawatts of new solar
capacity online in Germany this year, said Francesco d'Avack, a
London-based analyst at New Energy Finance. That's in addition
to the 9,786 megawatts in use at the end of last year, which is
equivalent to the capacity of about 11 new coal-fired plants.
Solar Surge
Germany is installing 10 times as much solar power capacity
this year as the U.S. Investors are racing to lock in above-
market rates for 20 years while they can. Germany's parliament
decided July 8 on a 16 percent reduction in solar subsidies, and
another reduction in the so-called feed-in tariffs is scheduled
for January.
Germany meets as much as 10 percent of its power demand
from the sun on some days, Andreas Haenel, chief executive
officer of German solar-plant developer Phoenix Solar AG, said
in an interview last month. In the southernmost state of
Bavaria, solar power contributes as much as 25 percent of total
electricity when the sun shines and demand is low, he said.
Solar power's share may rise to as much as 7.5 percent of
Germany's total power generation by 2013, according to Deutsche
Energy Agentur GmbH, from about 1 percent last year, as measured
by industry group Bundesverband Solarwitschaft.
Solar Data
As solar capacity jumps, traders will increasingly depend
on data for projecting availability and prices. The European
Energy Exchange AG in Leipzig started publishing daily data on
expected solar capacity on July 19, in addition to estimates on
other German power sources and. Solar output is expected to be
peak today at as much as 7,963 megawatts at 1 p.m. Berlin time.
The German government also plans to extend the lifespan of
ageing nuclear power plants. On Sept. 28, Chancellor Angela
Merkel's cabinet is set to approve a plan to allow reactors to
operate for an average of 12 years beyond a legally mandated
closure of 2022, to help the nation of 82 million people
transition to renewable power.
Germany's surplus power is weighing on coal-fired
generators. The so-called clean-dark spread, a calculation of
forward prices for fuel, power and carbon allowances, was at
5.36 euros a megawatt hour yesterday, according to Bloomberg
calculations. That's down from 11.93 euros at the start of this
year and almost 18 euros in December 2008.
Lekander at UBS expects as much as 10,000 megawatts of
solar capacity and 2,000 megawatts of wind-generated electricity
plants to be added in Germany this year. Neither renewable power
source is available 24 hours a day, unlike coal or nuclear.
Germany, the Netherlands and Belgium are collectively adding
about 7,000 megawatts of gas-fired capacity a year.
"The spreads have collapsed and won't recover in a long
time because there will be even more overcapacity next year,"
Lekander, 48, said.
For Related News and Information:
For more Energy Markets columns NI NRGM <GO>
European power-market stories TNI EUROPE PWRMARKET <GO>
Today's top power and energy news PTOP <GO>, ETOP <GO>
Energy markets home page NRG <GO>
European Spark and Dark Spread Calculator ESSC <GO>
--With assistance from Jeremy Van Loon in Berlin. Editors: Mike
Anderson, Steve Voss
To contact the reporter on this story:
Lars Paulsson in London at +44-207-673-2759 or
lpaulsson@bloomberg.net
To contact the editor responsible for this story:
Stephen Voss at +44-20-7073-3520 or sev@bloomberg.net
