March 23, 2015 / 3:23 PM / 5 years ago

Germany outlines plans for reserve power capacity-government paper

* Says would need 4 gigawatt (GW) of reserve

* Consumers would probably pay stand-by fees

* But utilities would pay for actual production

FRANKFURT, March 23 (Reuters) - Germany wants to cover power shortfalls with around eight new power stations and without the generous payouts that utilities hoped for, according to an Economy Ministry paper seen by Reuters on Monday.

Their capacity would amount to 4,000 megawatts (MW), equal to eight coal-fired power generation blocks and to five percent of maximum demand, it said.

The projects would be tendered at auctions and awarded to the lowest bidders.

The capacity would then be in place to guard against network black-outs, a greater risk because of Germany’s move away from nuclear and fossil fuels and use electricity from intermittent wind and solar units instead.

“The capacity reserve would offer the power market an additional ‘belt and braces’ insurance,” the paper said.

Under the plan, the utilities offering the capacity, would remain the owners of the plants but could only operate them to cope with emergencies, not to supply the market normally.

This would be rewarded by a standby fee, charged to consumers and monitored by the energy regulatory authority, the Bundesnetzagentur.

The agency’s president, Jochen Homann, hinted last month that a further national reserve might become necessary, on top of contracted capacity that plants in industrial southern Germany are already offering during winter seasons - when demand is highest - up to 2017.

If activated, utilities would have to pay for the output, as they were be tasked with ensuring they produced enough to meet demand.

The winter season reserve would eventually become obsolete, because new power transmission lines would be constructed to transport power, especially from wind, from the north to the south, the government said.

Utilities like E.ON and RWE have long lobbied for a capacity market funded by the public to compensate them as coal and gas-fired power is increasingly displaced by renewable sources.

But government members have spoken out against what they call “aid” for power plants, adding prices should be allowed to peak wildly at times of real scarcity, to help steer the matching of supply and demand. (Reporting by Markus Wacket, writing by Vera Eckert, editing by William Hardy)

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