RWE, one of the leading electricity and gas companies in Europe, has recently announced their plans to close down some of their gas and coal-fired power plants with up to 3.1 GW of generated capacity. As a main reason for this, the company outlines the drop in electricity prices due to the growing number of renewable sources.
Analysis of the current energy market in Germany shows that over the past four years it has been characterized by significant overcapacity. Subsidies are flowing towards renewable energy sources, causing a drop in wholesale prices and making the operation of conventional power generating facilities no longer economical.
According to the RWE’s latest report, many of their currently operating power plants are inefficient. With a price of EUR 40 per MWh down from EUR 55, it is almost impossible to make a profit. As a reference, a gas-powered plant requires a minimum of EUR 70, a lignite-powered plant needs EUR 45, and a nuclear-power plant needs at least EUR 40 in order to continue functioning. The company reported a decline in their profit by almost two thirds in the past six months.
Thanks to previously signed contracts and sales that have been made years ago, nuclear power plants are still doing well. However, following the current trends, economists foresee that the plans of the German government to phase out nuclear by 2022 might be accomplished much earlier than that.
According to Hans-Josef Fell, a member of the German Green Party, the report signifies that there is no longer a need or an option to construct new fossil fuel plants. This is not only because it is virtually impossible to generate enough profit that will cover the capital cost, but also because any new facility will have to be kept ready in case there is a need of backup energy generation, according to the German law.