Gas fired power generation is the poor relation in Germany because of German carbon reduction policy according to the Vice President of Statoil.

Rune Bjoernson said in an industry meeting, “The German business is challenging because of the energy policy. Through the subsidising of renewables, the price of carbon falls. In that way, gas cannot demonstrate its advantages as a low CO2-emitting fuel.”

Rune BjoernsonMr Bjoernson said that the policy encourages the use of power plants that burn carbon intensive coal rather than gas, harming the prospects of gas exporters to Germany.

New German power capacity under construction totalled 10.7 GW for coal and 1.7 GW of gas.

Reuters reports that as generators in the European Union have to cover power production that uses fossil fuels by buying emissions permits, this would tend to discourage coal-fired power generation which emits twice as much of the greenhouse gas carbon dioxide (CO2) as gas-fired output does.

However the price of the permits is historically low, partly because there is so much green power available already, undermining the advantage of gas and encouraging generators to build on existing coal-to-power capacity.

Coal is well established in Germany’s power mix, where it accounted for 42.8 percent in 2011, compared with gas accounting for 18.3 percent, according to Statoil data.

Statoil said they had to shelve plans for new gas-fired plants because the price of European wholesale power is near two-year lows, due to weak demand in the euro zone crisis.

The profitability of German gas-fired power plants has dropped to its lowest level since the summer of 2008, pushing the premium in generators’ margins of coal well over that of gas, Reuters data showed last month.

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