Gabriel to talk capacity mechanisms

German energy minister Sigmar Gabriel said his government during the first half of this year will start talks with utilities about capacity mechanisms as a backup for volatile renewable energy output.

But he rejected the creation of a full-fledged capacity market that would include all loss-making fossil power plants in the country.

The government should verify at which locations regional capacity mechanisms are needed, he said.

“We will look at that in discussions with industry and utilities,” Gabriel said at an energy conference in Berlin.

“But we won’t include all conventional (fossil) power plants in a capacity market. That would be a bit expensive. We won’t do that.”

Germany’s big utilities for long have been demanding a mechanism to get remunerated for not shutting down completely gas or coal-fired power stations that are loss-making as they operate only partly due to an abundance of renewable energy that enters the country’s power markets with priority.

Peter Terium, chief executive at Germany’s second-largest utility RWE, at the same conference complained that his company has 16GW of capacity in gas-fired power plants that mostly make losses.

“Gas power plants are needed urgently, when the sun doesn't shine and the wind doesn’t blow,” Terium cautioned, adding that the security of Germany’s energy supply was in danger if too many fossil plants have to be switched off.

Leonhard Birnbaum, board member at Germany’s biggest utility E.ON, said that there are currently no gas power plants that make money in continental Europe.

“Spark spreads (theoretical gross margins) are such, that the entire gas-fired production fleet brings tears into one’s eyes,” he said at a press conference, stressing that no operator will become rich through capacity mechanisms.