Solar and wind leaving "a trail of blood" on German utility balance sheets.

Bloomberg: “Germany is headed for its biggest electricity glut since 2011 as new coal-fired plants start and generation of wind and solar energy increases, weighing on power prices that have already dropped for three years.”
“Utilities from RWE AG to EON SE are poised to bring units online from December that can supply 8.2 million homes, 20 percent of the nation’s total, according to data compiled by Bloomberg. That will increase spare capacity in Europe’s biggest power market to 17 percent of peak demand, say the four companies that operate the nation’s high-voltage grids. The benchmark German electricity contract has slumped 36 percent since the end of 2010.
The new coal plants are starting as Germany aims to almost double renewable-power generation over the next decade. Wind and solar output has priority grid access by law and floods the market on sunny and breezy days, curbing running hours for nuclear, coal and gas plants, and pushing power prices lower. The profit margin for eight utilities in Germany narrowed to 5.4 percent last year from 15 percent a decade ago.
“The new plants will run at current prices, but they won’t cover their costs,” Ricardo Klimaschka, a power trader at Energieunion GmbH who has bought and sold electricity for 14 years, said June 25 by e-mail from Schwerin, Germany. “The utilities will make much less money than originally thought with their new units because they counted on higher power prices.”
….Lower prices “leave a trail of blood in our balance sheet,” Bernhard Guenther, chief financial officer at RWE, Germany’s biggest power producer, said May 14 on a conference call after the company lowered its goal for annual net income.
….The government wants renewable power to supply as much as 45 percent of the nation’s energy by 2025, compared with about 27 percent in this year’s first quarter.
Wind and solar’s share of installed German power capacity will rise to 42 percent by next year from 30 percent in 2010, according to European Union data compiled by Citigroup Inc. The share of hard coal and lignite plant capacity will drop to 28 percent from 32 percent, the data show.
German utilities plan to start new hard-coal plants with 5,606 megawatts of capacity this year and next, data from Bonn-based national grid regulator Bundesnetzagentur show. That compares with a target of at least 10,000 megawatts from new solar and wind installations in 2014 and 2015 under Germany’s renewable energy act, which takes effect Aug. 1. Solar output reached a record 24,244 megawatts on June 6, according to EEX.
“We have a huge oversupply of power and Germany wants to switch to renewable energy,” Claudia Kemfert, who heads the energy unit at the DIW economic institute, a research group in Berlin, said in an e-mail on June 20. “That’s why investments in new coal plants are bad investments.”
….Power prices slump or even turn negative when wind and solar energy flowing into Germany’s grid exceeds demand, especially on weekends, when factories and offices are closed. The average weekday spot power price over the past 12 months was 39 euros a megawatt-hour, compared with 21.10 euros on Sundays, according to Deutsche Bank AG.
The “Sunday discount” is costing generators as much as 26 percent of group earnings, Martin Brough, a London-based analyst at the bank, said June 10 in a report. RWE’s income may be reduced by 164 million euros, or 16 percent of earnings per share, in 2015, while the impact on per-share profit might come to 5 percent for EON and 26 percent for Austria’s Verbund AG (VER), according to Brough.
….“The boom of coal plants is over for now,” Vattenfall’s Hoffmann said. “And the situation won’t improve before the next decade, when old coal plants and nuclear reactors go offline.”