March 28, 2011 / 8:18 AM / in 7 years

UPDATE 3-Power, coal, carbon prices rise on German election

* 2012 power prices at highest since late 2008

* Carbon, coal gain 2 pct

* Market expects oldest nuclear reactors to stay offline

(Updates throughout)

By Karolin Schaps and Henning Gloystein

LONDON, March 28 (Reuters) - European energy prices jumped on Monday as a key Green Party victory in German state elections underlined concerns that widespread anti-nuclear sentiment may permanently shut Germany’s oldest reactors.

German baseload electricity contract for 2012 rose BY1DE-1Y to its highest since before the global financial crisis slashed power prices in late 2008, while the price of coal for delivery into Europe next year ICPAP2YZ2 and for permits to emit climate-warming carbon both rose nearly 2 percent. CFI2Zc1

“The power market is taking the view that certain plants are not coming back. If there is a hard, fast decision (on keeping reactors offline) prices would go in an upwards trend,” said Martin Young, Executive Director for Equities Research at investment bank Nomura.

The surge in prices comes after Japan’s nuclear disaster prompted Chancellor Angela Merkel to impose a three-month moratorium on her coalition government’s decision to extend the lifetime of Germany’s nuclear reactors, which helped steer the anti-nuclear Greens to control of Baden-Wuerttemberg at the weekend elections. [ID:nLDE72E176]

Seven nuclear reactors shut down following the moratorium in place until at least June, but German power traders believe the loss in political support for nuclear power in Baden-Wuerttemberg will lead to the permanent shutdown of the two oldest reactors located there -- Philippsburg I and Neckarwestheim I -- and other shutdowns will follow quickly.

“I think this now increases the likelihood that Neckarwestheim I and Philippsburg I do not come back after the moratorium and that the other units are phased out quickly,” a London-based energy analyst at an investment bank said.

Environment minister Norbert Roettgen, a close Merkel ally, fuelled the debate on Monday as he called for a quicker shutdown of Germany’s nuclear reactors. [ID:nLDE72R0JT]

BULLISH FOR CARBON, POWER

The benchmark contract for EU Allowances CFI2Zc1 rose as high as 17.35 euros a tonne early on Monday, the highest in eight days, while coal prices for year-ahead delivery rose above $130 per tonne, maintaining highs seen last week.

“Getting rid of old nuclear plants means plants will run more coal and gas. That means around 70 million tonnes of extra carbon dioxide will be emitted and carbon is up on this prospect for now. The question is how much is this worth in terms of additional carbon price?” said Emmanuel Fages, analyst at Societe Generale/orbeo.

European Energy Commissioner Guenther Oettinger, who before his position in Brussels was Prime Minister of the state of Baden-Wuerttemberg, also supported the view that coal will act as a substitute to nuclear in Germany. [ID:nBAT006123] <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For a graph on German 2012 base power, click: here

Graphic of German power vs coal prices:

link.reuters.com/jyg78r ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

UTILITIES, RENEWABLES GAIN

Share prices in German utilities rose on the back of high gains in power prices and the prospect that utilities may be able to see higher returns from coal and gas plants to substitute the loss in nuclear capacity. Shares in utility RWE (RWEG.DE) initially fell on Monday but rebounded later to rise 0.43 percent above Friday’s close to 44.88 euro at 1055 GMT on Monday, while shares in E.ON (EONGn.DE) were down 0.16 percent.

Renewable energy shares in Germany continued their strong gains and the OekoDAX .OEKODAX, one of the country’s biggest renewable stocks was up 6.5 percent on Monday, while the S&P Global Clean Energy Index .SPGTCLEE was up 1.9 percent.

Renewable stocks have soared since Japan’s March 11 earthquake and tsunami which damaged nuclear power reactors and caused radioactive leaks.

The global backlash against nuclear power has boosted the outlook for renewable energy as governments ponder their nuclear options. [ID:nLDE72O11Z] <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For a graph showing utilties share prices click here: here

Graphic on renewable stocks: r.reuters.com/fex58r ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

The election outcome in Baden-Wuerttemberg on Sunday is likely to mean an end to the 58 year long rule in the state of chancellor Angela Merkel’s conservative CDU party.

This is likely to leave the anti-nuclear Green Party in control of the utility EnBW (EBKG.DE), which operates four nuclear reactors, two each at Neckarwestheim and Philippsburg.

It would be the first time that the Green Party has headed a state government in Germany.

The CDU’s pro-nuclear policies, which included buying a majority stake in EnBW last year, were punished by Baden-Wuerttemberg voters after the nuclear crisis in Japan.

The opposition Greens claimed about around 25 percent of the vote and will likely form a coalition with the Social Democrats, who took around 23 percent of the votes.

Additional reporting by Daniel Fineren, Nina Chestney and Christoph Steitz; editing by Keiron Henderson

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