Study warns of billions in risks from gas-fired power plants

A study by the Forum Ökologisch-Soziale Marktwirtschaft (FÖS) warns of the economic risks of new gas-fired power plants in Germany.

According to the Forum Ökologisch-Soziale Marktwirtschaft (FÖS), the planned construction of new gas-fired power plants could result in considerable economic costs. The Berlin-based institute, which prepares economic and financial policy analyses with a focus on environmental and climate policy, has presented a brief study on behalf of energy provider Green Planet Energy. According to the study, in addition to direct investment costs, there is also the threat of high external climate damage, which has not yet been included in the electricity price.

The analysis focuses on an exemplary gas-fired power plant with an output of 500 MW. According to the study, such a plant could emit several million tons of CO2 by 2045. The resulting climate damage could amount to up to seven billion euros, according to FÖS. These costs have not yet been fully included in economic assessments of power plant projects.

Gas price increases

In addition to the impact on the climate, the authors of the study also point to the risks associated with dependence on international gas supplies. Germany remains dependent on global markets for natural gas, the price development of which can hardly be controlled politically. According to the FÖS, current developments on the energy markets show how strongly geopolitical events can influence prices.

The study cites recent price movements on the European gas trading hub Title Transfer Facility (TTF) as an example. The gas price there has risen from around EUR 32 to up to EUR 65 per MWh in just a few days. The background to this is a geopolitical escalation in connection with the Iran conflict, which has unsettled the energy markets worldwide.

Florian Zerzawy, Team Leader Energy Policy at FÖS and co-author of the study, sees this as a structural risk for the energy supply. "Our analysis clearly shows that new gas-fired power plants not only cause high direct costs, but above all massive climate damage that has not yet been taken into account," explained Zerzawy according to the press release. A single power plant could generate external costs in the billions by 2045. In view of the available alternatives, an extensive expansion of fossil fuel capacities makes neither economic nor climate policy sense.

Flexibility and storage are better choices

The study points to several options that can be used to ensure security of supply and flexibility in the electricity system. According to FÖS, these include storage technologies, load management, bioenergy and green hydrogen. According to the analysis, these technologies could contribute to the stability of the electricity system at comparable costs and at the same time reduce the risk of price shocks.

The authors of the study believe that not only the direct investment and operating costs should be considered when selecting technologies. The costs to society as a whole are also crucial, for example due to climate impacts or price risks on international energy markets.

Carolin Schenuit, Managing Director of FÖS, also points to the geopolitical risks of fossil fuels. "The war in Iran shows us once again how dangerous dependence on fossil fuels is," she said in a statement. Price shocks put a strain on households, companies and the entire economy. An energy infrastructure must therefore be designed to be crisis-proof.

Build fewer new gas-fired power plants

According to the institute, this goal can be achieved primarily through renewable energies and flexible technologies. Systems based on renewable energies are less susceptible to geopolitical conflicts as they are not dependent on international commodity markets.

The FÖS therefore recommends limiting the construction of new gas-fired power plants and gearing government funding programs more towards climate-friendly flexibility options. According to the study, this is the only way to reconcile the planned power plant strategy with the goal of climate neutrality. This would also reduce the risk of renewed price shocks on the energy market.

The FÖS study on the costs of gas supply is available to download as a PDF.

Author: Susanne Harmsen