January 30, 2008 / 3:26 PM / 10 years ago

Evonik delays coal plant plan

FRANKFURT (Reuters) - Germany’s Evonik group will delay a planned hard coal fired power station as building prices have risen and the EU’s new carbon dioxide (CO2) emissions rules have made it too costly, it said on Wednesday.

The project for a 750 megawatt block, called Herne 5, had been circulating since 2006 in the power market and was part of the German utility industry’s long-term plans to revamp and replace ageing power stations.

The Evonik conglomerate’s coal based power producer Steag had said it might start building the plant in the summer of 2008 and that it might come on stream by 2011.

Evonik said in a statement that, while construction had been delayed for now, the company was keeping its options open.

“This (decision) results mainly from higher prices to build power plants as well from the entire auctioning of CO2 emission permits for new plants after 2012, which has been proposed by the EU Commission,” it said.

“Should these factors improve, Evonik would be quickly in a position to decide on construction after all.”

The Commission last week introduced a new system to auction permits to emit CO2, as part of its climate protection proposals where power generation plants are the biggest polluters.

CO2 permits were initially handed out to polluters for free during the last three years but the EU wants to phase in the auctioning of all such permits between 2013 and 2020.

This is to raise the costs for polluters, prevent windfall profits at the installations and encourage alternative technologies. But the policy also discourages investments.

RWE Chief Executive Juergen Grossmann warned in a weekend interview that Germany was facing a generation shortfall by 2020 of up to 30,000 MW, or between a quarter and a third of its current capacity, if the EU policies became effective.

Reporting by Vera Eckert, editing by Anthony Barker

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