By Vera Eckert
ESSEN, Germany, Feb 5 (Reuters) - German utility group Trianel said its new coal-fired power station at Luenen will be loss-making for years and urged policymakers to come up with remedies for a skewed energy market.
Luenen, planned around five years ago by the 29 local utilities and regional energy firms who together form Trianel, is a victim of German policy to favour low-carbon generation with subsidies which have driven down the price of electricity from other sources.
'The erosion of power prices through the unhindered expansion of renewable energy makes any investment in the energy shift an economic shot in the dark,' said Seven Becker, spokesman for the Trianel management board.
'We need a stable market model which offers investors ... the chance to finance the capital costs of new power plants,' he told reporters at the E-World of Energy trade fair in Essen.
Discussions at the annual event focused on demands that Germany should make adjustments to its blueprint for quickly turning into a low-carbon economy.
While renewable energy is subsidised regardless of supply and demand fundamentals, its intermittent nature means other sources still have to be available on the grid, even though they are increasingly uneconomic.
Becker said Trianel's experience illustrated the dilemma, since its losses on Luenen would run into millions of euros annually for several years or more.
'We're not alone with these problems, they affect the entire market,' he said, adding companies such as RWE, E.ON , Steag and GDF Suez faced the same scenario.
The 750 megawatts (MW) Luenen plant has been in test mode since late last year and is expected to run at full capacity from the third quarter.
The 1.4 billion euros ($1.9 billion) plant was planned when operators stood to achieve some 60 to 80 euros from selling a megawatt hour of round-the-clock baseload electricity in the wholesale market.
This price has dropped to 41 euros/MWh. Some 20 percent of the decline has come in the last 12 months, partly due to the weight of new solar power supply.
In a rush to lock in generous green energy subsidies for 20 years before reductions take hold, solar operators last year added a fifth of new capacity and now deliver 32,000 MW, as much as all of Germany's hard-coal fired plants.
Becker said prices needed to be around 55 to 60 euros/MWh for coal-burning to make economic sense. And he said the market might need a further wave of closures to allow a return to profitability.
Germany early in the last decade cut 4,000 MW in one go, pushing prices up 20 percent.
Other options are also being discussed - for example redrawing the market to reward providers of round-the-clock power and forcing green producers into some form of operational or financial responsibility for supply security.
There is also a political debate about a plan by German environment minister Peter Altmaier to cap renewable subsidies as early as this year.
Becker stressed that Trianel, despite its problems, was committed to be a player in the evolving energy market - it will take online this year a 27 MW onshore wind power plant in Eisleben and a 200 MW offshore wind park in the North Sea. ($1 = 0.7376 euros)
(Editing by David Holmes) Keywords: GERMANY POWER/TRIANEL
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