GDF Suez SA Chief Executive Officer Gerard Mestrallet said the idling of gas-fired power plants in Europe has created a crisis on a greater scale than one that saw uncompetitive steel plants shutter.
“The crisis of Europe’s gas plants is far worse than that at the height of what hit the steel industry in terms of overcapacity,” Mestrallet said today at a hearing on France’s future energy mix. “This sector is stricken.”
Utilities including GDF Suez SA and EON SE are idling gas plants and turning to cheaper coal. The switch lowers profit for gas plants, which generate almost a quarter of European power, and shrinks the market for suppliers led by OAO Gazprom. It also increases emissions.
The European Parliament last month rejected a proposal to rescue the carbon market through so-called backloading, which would have cut the number of carbon permits to shore up prices and make polluting more costly.
“We have to reestablish a carbon signal,” Mestrallet said today. “Coal is being chosen ahead of gas so gas plants are being stopped. This is an enormous problem.”
GDF Suez is closing, or mothballing, more than 8,000 megawatts of capacity in Europe from 2009 to 2013.
The utility took 2 billion euros ($2.6 billion) of charges for 2012, mainly incurred on gas-fired power stations because of the weakness in Europe’s power market. Lower demand, the falling price of carbon-emission permits and the relative expense of gas compared with coal have combined to make generation unprofitable.