Now Available: Germany Power Report Q3 2013

From: Fast Market Research, Inc.
Published: Fri Aug 09 2013

The favourable conditions governing the integration of renewables-based generation into the grid and the sheer volume of electricity generated from green sources is creating a number of challenges in the German power sector, penalising base-load producers and causing many utilities to consider mothballing uneconomical thermal capacity. As a consequence, there have been calls for both reform of the German electricity wholesale market and reductions in subsidies for renewables, in order to integrate both green energy and traditional sources of generation into the mix - while also ensuring the costs of the country's energy transformation (Energiewende) are sustainable. As such, we expect Energiewende to be central to the pre-election debate and take the view that the government will have to act if it is to stop the switch to renewables having a detrimental impact on Germany's competitiveness.

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The key trends and developments in the German electricity market are:

* We forecast power generation in Germany to increase at an annual average of 0.96% between 2013 and 2022, ending the period at 636.3TWh. We highlight that the key trends in German power generation include a forecast average annual decline of 12.4% in nuclear generation, which will be partly counterbalanced by growth of 0.9% in coal generation, 4.3% in gas-fired generation and 5.0% growth in nonhydro renewables-based generation through to the end of our 10-year forecast period.
* The cost of Energiewende and its impact on the German economic competitiveness are taking on such significance that, in March 2013, sources close to Chancellor Angela Merkel hinted she might set up a national energy ministry to manage the transition from nuclear to renewables if elected for a third term. Further emphasising the point, Reiner Haseloff, the state premier of Saxony-Anhalt, is reported by Bloomberg to have said that the country's energy policy is 'the most strategic task since German reunification in connection with the economy'.
* Highlighting the cost of Energiewende, Germany's Environment Minister, Peter Altmaier, said in February 2013 that the total cost could be as much a EUR1trn through the 2030s.
* The vast amount of new renewables capacity coming online has driven down wholesale electricity prices. In this environment, cheaper, dirtier coal is emerging as the most profitable type of traditional thermal generation at the expense of more costly gas-powered capacity. To this end, in early May 2013, Norwegian state energy company Statkraft said it had idled its Robert Frank gas-fired power station in Landesbergen, Lower Saxony, because it could not compete with coal-fired facilities in terms of profitability.

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