Cologne utility okays new gas-to-power plant

COLOGNE: Germany Rheinenergie of Cologne is to go ahead with the construction of a new gas-fired power station after its supervisory board approved the plan, the utility said on Friday.

Gas-to-power units are reliable and flexible to switch on and off, which makes them a logical asset to complement Germany's fast expanding renewable power installations, chairman Dieter Steinkamp said in a statement.

"Modern and local power stations, ideally producing both power and heat from environmentally friendly natural gas, will be the backbone of supply security in Germany over the coming decades," he said. "We are contributing to this process."

The unit, called Niehl 3, will have a capacity between 450 and 600 megawatts and is due to come on stream in 2016. It will cost up to 500 million euros ($645 million).

Bidding for construction will close by the end of the year.

The company said the move was subject to local authority approval and would require capital-raising measures which it did not specify.

Gas-to-power is a fossil fuels-based technology less favoured than renewable alternatives but gas burnt for power generation emits half as much carbon dioxide as coal.

Green power such as that derived from wind and sunshine is volatile because it is generated only when the weather is favourable, which means large-scale power infrastructure is still needed in Germany, Europe's biggest power market.

However, investor appetite for gas plants has been curbed, which makes Rheinenergie's move noteworthy.

Finance has dried up during the euro zone's economic crisis and gas feedstock is hard to obtain at competitive prices on a long-term basis. Long-term gas is expensive while power prices are too low to justify building new gas-to-power plants.

Rheinenergie's way around this will be a combined power and heat generating turbine, which is carbon-efficient and offers the option of marketing the heat from up to 265 MW of the capacity, the company said.

Rheinenergie is 80 percent public-sector owned by the city of Cologne. Utility RWE holds the remaining 20 percent.