Steag GmbH started Germany’s first new power plant fueled by hard coal in eight years, allowing the generator and energy trader to take advantage of near record-low coal prices that have widened profit margins.
The 725-megawatt Walsum-10 plant, located near Dortmund in the western part of the country, began electricity output today, the Essen-based company said in an e-mailed statement. It will probably start commercial operations later in the year after “optimization works and testing,” it said.
The plant is the first new hard-coal-fired generator in Europe’s biggest power market since 2005. It marks the start of Germany’s biggest new-build program for hard coal stations since its liberalization in 1998. Ten new hard-coal power stations, or 7,985 megawatts, are scheduled to start producing electricity in the next two years, according to information from German grid regulator Bundesnetzagentur and operators.
“Coal prices recently fell to their lowest price for over four years in October and carbon prices are half what they were two years ago, making coal-burn extremely attractive to generators in terms of profitability,” Gary Hornby, energy markets analyst at Inenco Group Ltd., said by e-mail today.
The price for coal used in thermal plants for delivery to Amsterdam, Rotterdam or Antwerp next year, dropped to a record low of $80.25 a metric ton on Oct. 14, according to broker data compiled by Bloomberg. The contract traded at $81.60 at 2:51 p.m. London time, broker data show.
Generating electricity by burning coal currently makes a profit of 9.16 euros a megawatt hour, compared with a loss of 19.31 euros a megawatt hour from gas, according to data compiled by Bloomberg based on next-year German power prices. This is the widest gap between the two fuels for at least four years, according to data compiled by Bloomberg.
“Gas power plants coming off line must be replaced with baseload generation, coal seems the logical solution,” said Hornby.
The 10 new units will boost German hard coal generation capacity by 33 percent to 32,432 megawatts from 24,447 megawatts as of Oct. 16, regulator data show.
Walsum-10 will probably operate 5,000 to 6,000 hours per year, Juergen Froehlich, a Steag spokesman, said Oct. 30 by e-mail.
Steag has sold 57 percent of the plant’s output to EVN AG, a utility based in Vienna, while EnBW Energie Baden-Wuerttemberg AG is buying 35 percent under a long-term contract.