Germany’s Largest Utility Ditches Two Long-Term Contracts For Coal Power

[kristopher]

Germany’s Largest Utility Ditches Two Long-Term Contracts For Coal Power
BY JEFF SPROSS ON DECEMBER 23, 2013 AT 2:52 PM

RWE, Germany’s largest electrical utility, will not renew two long-term contracts for coal-fired power, according to Bloomberg News.

In Germany, long-term contracts like this work by allowing utilities to buy power from a producer for a fixed rate over the contracted period of time. Utilities do this if they anticipate being able to then turn around and sell the electricity for a profit. The risk, of course, is that prices could suddenly drop in the middle of the contract, leaving the utility high and dry.

That seems to be what happened here. “German power prices for 2014 slumped 17 percent this year as renewable energy production surged and power consumption fell to the lowest since 2009, cutting margins at gas- and coal-fired power stations,” Bloomberg reports. As a result, the two long-term contracts RWE has with the power generator STEAG GmbH — which expire in the next two years — are looking far less attractive. Bloomberg’s source also said RWE won’t be renewing other contracts with two smaller coal plants.

RWE said in August it plans to shutter 3,100 megawatts of capacity in Germany and the Netherlands, which accounts for about seven percent of its production in northern Europe. In October, the utility’s Chief Financial Officer said it will decide what to do with 1,450 megawatts of coal capacity its contracted with at the end of 2013.

Though the collapse in demand for power could lead to less coal burning and thus fewer carbon emissions, it’s still a mixed bag....

http://thinkprogress.org/climate/2013/12/23/3101911/german-utility-coal-power/

[cprise]

1. So that 'bump' we saw in 2012

for Germany's coal use may turn out to be only a bump.