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Cold European Winter Could Create Energy Crisis, Cap Gemini Says

Cold European Winter Could Create Energy Crisis, Cap Gemini Says
A woman crosses a street under a sudden, heavy snowfall in Berlin, Germany. Photographer: Sean Gallup/Getty Images

Oct. 10 (Bloomberg) -- A cold winter may plunge Europe into an energy crisis because of the over-reliance on renewable energy and the shutting of natural gas-fired generators, Cap Gemini SA said in a report.

Gas-fired generators are running at utilization rates that are too low to meet their fixed costs as grids favor subsidized renewable power, the Paris-based management consultancy said today. About 60 percent or 130,000 megawatts of Europe’s gas-generation capacity is at risk of closing by 2016, it said, citing IHS Inc. estimates.

“These plants -- that are indispensable to ensure security of supply during peak hours -- are being replaced by volatile and non-schedulable renewable energy installations that are heavily subsidized,” according to the report, produced with Exane BNP Paribas, law firm CMS Bureau Francis Lefebvre Lyon SELAS and think tank VaasaETT.

Generators are switching to cheaper coal for baseload power as the U.S. exports the fuel amid a shale-drilling boom that has driven up domestic gas demand, Cap Gemini said. The collapse of the cost of carbon credits has strengthened the appeal of the polluting fuel.

The consultancy urged reform of the emissions-trading system to boost the price of emitting carbon. It also called for a coordinated European capacity market to pay plants to ensure there’s enough capacity in reserve at periods of high demand.

“Without longer-term economic incentives to invest in new and vital energy infrastructure and in the face of a declining utility margins and revenue, longer term security of energy supply could be in jeopardy,” Colette Lewiner, energy adviser to Cap Gemini’s chairman, said in the report.

To contact the reporter on this story: Sally Bakewell in London at sbakewell1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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