Analysis - Germany's nuclear exit no threat to power supply

FRANKFURT/LONDON (Reuters) - Germany has enough power capacity to make up for its planned exit from nuclear energy while ongoing grid and renewables expansion makes a supply surplus likely until at least 2020.

The country's electricity consumption is around 550 terawatt-hours (TWh) per year and the outlook is stable, according to data from renewable energy association BDEW.

At the same time, maximum annual power generation is seen at more than double that, or some 1,358 TWh from an installed power plant capacity of 155,000 megawatts (MW).

That means Germany would have enough power even if plants were to operate at below 50 percent efficiency. Generation stood at around 624 TWh in 2010, according to AGEB, a German energy statistics association.

"We cannot see any indication of capacity squeezes," Jürgen Tzschoppe, managing director of Statkraft Markets, told Reuters.

In fact, Germany returned to net power exporting in early October, reaching export volumes last seen before the nuclear moratorium, figures from the European transmission systems operator show.

Windier than usual weather helped, but even without this factor the German power market looks oversupplied.

A reservoir of idled power plants and flows through its nine land borders will allow Germany's power grid to absorb the exit from nuclear power and keep Europe's largest economy operating and grids are now being upgraded.

"There is enough conventional capacity, and German generators could easily produce the minimum amount to cover demand, even on a day when there is no sun, and no wind at all," a trader with a major German utility said.

Analysts say there is no immediate need to add new capacity, either.

"Today's requirements for capacity additions are zero (and) the reason is the current situation of overcapacity," consultancy BET said in a recent study for green energy providers.

This stands in contrast to warnings of power outages by the nuclear operators.

Germany's biggest four utilities -- E.ON, RWE, Vattenfall, and EnBW -- operate all of the country's nuclear plants and control some 80 percent of Germany's generation capacity.

RWE's CEO Juergen Grossmann has warned several times that the risk of blackouts threatens the country's industrial sector.

GRID IMBALANCE

Instead of new capacity, BET said there was a need to address an imbalance in power demand and supply affecting Germany's grids.

The highly industrialised South where big companies like Daimler, Siemens and BASF have plants produces less electricity than the North but needs more.

In the North, there is huge potential for offshore power generation along the North Sea and Baltic Sea coasts.

Fixing this imbalance is necessary to avoid Germany breaking into different price zones, analysts say.

Such a split would likely mean higher wholesale power prices in the South, where politicians fear this would hurt the region's competitiveness and drive away business, either to northern Germany or abroad.

"There is a danger of having two price zones in the German electricity market caused by cutting off the stabilising nuclear power plants while we have the majority of the wind assets in the northern part of Germany," said Maik Neubauer, partner at Baringa, an energy and finance consultancy.

To avert this, grid operator Amprion is building 600 kilometres of north-south power lines while Tennet has 11 projects to prevent bottlenecks.

Three of the four operators also plan long-distance power lines and the German grid regulator plans to keep returns from the grids almost unchanged to support investment.

BACK-UP CAPACITY

The German government wants to produce 30 percent of its power from renewable energy sources by 2020 and the shedding of nuclear power has bolstered the role of wind farms and solar panels.

That means a need for more power plants that can be started at short notice when solar or wind power do not suffice.

With this in mind, the government, supported by clean energy think tanks such as the Oekoinstitut, is considering a subsidy to build back-up power capacity reserves, such as gas-fired power plants or pump storage facilities.

In 2010, Germany had a capacity of 30 gigawatt of gas and water pump storage power plants -- which can be fired up at short notice -- compared to 45 megawatts in wind and solar power.

But current wholesale power prices do not signal a need to use all of that reserve gas capacity.

Statkraft says it has two gas-fired power stations in Landesbergen and Emden with a total capacity of nearly 1,000 megawatts that would not be profitable to operate commercially right now.

For Statkraft to use its gas plants would need wholesale prices to rise by 50-60 percent for a sustained period of time, according to Tzschoppe.

Low wholesale market prices are also holding back investors looking at new conventional power plants and back-up facilities.

"Large-scale investments into new power plants are not to be expected because revenues would not be sufficient to cover fixed, variable and capital costs," BET said.

After 2020 that reserve capacity needs to be financed either through subsidies or higher power prices.

"Those are costs society will have to get used to," said Oekoinstitut's Andreas Hermann.

(Editing by Jason Neely)