Cartel crackdown on balancing power -- Formal proceedings launched

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With wind development in Germany continuing apace, conventional power companies claim they see a lucrative future for power stations which provide balancing power to the grid network when output from turbines is low. Several companies have already announced plans to meet what they see as a growing need for balancing power, while the federal cartel office (FCO) has been clear it will stamp down on any company suspected of raking in illegal profits from the business.

The need for extra balancing power is clear, says Eberhard Meller of German electricity association Verband der Elektrizitätswirtschaft (VDEW). "Integration of the growing generation from renewable energy in electricity supply is one of the most important tasks of the electricity sector," he says. "Increased availability of power station reserves and balancing power is necessary to stabilise the network."

One company to announce balancing power investment plans is RWE Rheinbraun, the lignite mining and power station division of the multi-utility RWE Group. Gas turbines providing up to 200 MW of extra capacity will be installed at some of its six, 600 MW lignite power stations to provide balancing power to the grid. The first gas turbine is expected to be installed at the Weisweiler lignite power station in North Rhine Westfalia -- a gas transmission pipeline runs close by and offers the possibility of "a particularly attractive fuel price," says the company.

E.on Energie is also believed to have taken steps to increase its balancing power portfolio, reportedly acquiring a stake in a gas-fired power station under development at Lubmin on the Baltic Coast. The company hopes to build offshore wind farms in the Baltic Sea and North Sea and the Lubmin gas plant (up to 1200 MW in size) could meet the need for balancing power expected if the offshore plans proceed. Other shareholders in the Lubmin development are EnBW, a large energy company, and Concord Power, in which EnBW has a 50% stake. The size of the E.on stake has not yet been revealed.

high prices

The FCO, however, is on the war path. It has launched formal proceedings against RWE Rheinbraun, its sister company RWE Power, and E.on Sales and Trading, suspicious they are charging excessively high prices for primary (30 second reserve) and secondary (five minute reserve) balancing power. Both RWE and E.on have a strong position in their network balancing zones, the FCO notes, due to their substantial generating capacity and long term contracts with other power station operators. Furthermore, they provide 70-100% of balancing power in their zones and the prices achieved for the power have risen sharply over the last two years. This has happened, the FCO says, even though there have been no market changes "that could account for these price hikes."

The FCO's Ulf Böge says the price hikes could be a result of the "large leeway" RWE and E.on companies have in their balancing zones -- the elastic in setting prices is enhanced by the strict separation between the zones of RWE, E.on, EnBW and Vattenfall Europe. He adds that market conditions for more competition in the balancing power sector "would be improved if the balancing zones were merged."

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