Germany’s green energy boom is slaughtering coal companies

Since the beginning, the commercial growth of renewable energy has been a laborious, often painful matter of government pushes, tax incentives, and campaigning for greater awareness. In Germany, however, the energy market is on the cusp of evolving to the next step: An era in which the sun and the wind replace fossil fuels through the sheer, unstoppable force of the market. The country is currently experiencing a glut of energy, thanks to the recent openings of new coal power stations as well as record levels of renewable generation. On sunny and windy days, the excess of electricity gets so big that energy prices are pushed downwards and traditional power stations are forced to cut down their running hours. A decade ago, fossil companies enjoyed a 15% margin on their sales, but today they make just five percent. An energy trader has informed Bloomberg that he believes that the latest coal stations to come online will make “much less money than originally thought” and “won’t cover their costs.”

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.”