24 März 2015

RWE drops biomass power stations after poor performance

Company argues that conventional power generation is hardly viable any longer under current market conditions

Low electricity prices and unusually mild weather contributed to RWE reporting a 25% drop in business performance from 2013-2014. The company, which is the third-largest gas-fired power station operator in Europe, also announced on 10 March that constructing new biomass electricity plants will no longer be one of its “focal points”. 

Conventional power stations ‘hardly viable’

Peter Terium, CEO of RWE, said at press conference that 35-45% of the utility’s conventional power stations are no longer making any money under current market conditions.

“I am not talking about book values—these power stations are costing us real money,” he said. “We cannot avoid the sobering fact that conventional power generation is hardly viable any longer under current market conditions.”

Recent modernisations of the company’s portfolio of power stations have not been financially successful, Terium said, pointing out that it is difficult to keep a gas or coal-fired power station commercially feasible.

“Considering how quickly the electricity wholesale price fell in recent years,” he added. “It would be impossible to cut a power station’s costs at the same rate to maintain margins or even make any profit at all.”

New focus on biomass thermal

RWE closed its Tilbury biomass power station in summer 2013, after it was converted from coal in 2011. The company also sold 80% of its stake in its biomass-fired power station in Sicily in September 2014. However, biomass thermal will continue to be a focus for RWE, after its first 46-MW biomass-fired thermal power station was commissioned in March last year near Markinch in Scotland.

From now on, Terium said, RWE intends to make use of new opportunities for electricity generation based on: “renewables, decentralised supply structures, highly flexible power stations, smart grids and customer requirements that involve more than merely purchasing electricity and gas.”

He added that the expansion of electricity generation from renewables remains a “cornerstone of our growth strategy”, stating that RWE are setting aside “around €1 billion for the expansion of renewables between 2015-2017.”

Investment in UK onshore wind

He also announced that the company has recently received a “Contract for Difference” for three UK onshore wind farms, representing a total capacity of about 170 megawatts, which will give us a fixed remuneration for these projects for 15 years. It also drives forward the expansion of our wind power portfolio in the UK.

Terium concluded his speech by calling on policy makers to “improve our existing “energy-only market.”

“This should encourage competitors to respond to market signals and adapt more quickly and more flexibly to changes in feed-in from renewables”, he said. “The core element of this concept is that it would allow extreme price spikes on the electricity spot market, which is currently not permitted under anti-trust legislation.”

To read the full speech click here.

Source: NNFCC, press release, 2015-03-16.


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