New realism set to slow energy transition, extend thermal generation: ContourGlobal

The current geopolitical turmoil will slow the energy transition and extend the role for generation based on lignite coal, nuclear and LNG, independent generator ContourGlobal said March 18 in an annual results statement.

At the same time, supply chain and financing pressures were being felt acutely in greenfield renewable energy development, the generator said.

"A new realism about the geopolitics of electricity supply emphasizing the need for diverse sources of baseload generation and decreased reliance on Russian gas supports our view that we are in the midst of a lengthier transition which will see a larger than previously expected role for power generation based on lignite coal, nuclear and liquefied natural gas," ContourGlobal CEO Joseph C Brandt said.

For the first time in seven years, meanwhile, developers with large pipelines of renewable energy projects were being more selective about which projects to progress.

"Gone are the days when renewable developers boasted of enormous pipelines all of which were expected to be built," Brandt said.

The dramatic increase in gas and power prices had led to a fundamental review of power market design, he said.

"We have been saying for four years that the future of the European power generation market looked to be increasingly a regulated one with the abandonment of marginal cost pricing and its replacement with some form of a guaranteed regulated rate of return applied to the entire generation sector," Brandt said.

Numerous policy proposals have been floated by European governments and the European Commission to reduce the impact of rising energy prices on consumers and businesses.

"Such polices may alter the markets into which electricity from our plants is sold, impacting the profitability of uncontracted power plant such as [the 800-MW Spanish combined cycle gas plant] Arrubal," the company said.

At the same time, the introduction of regulated pricing contained in recent proposals would positively impact ContourGlobal's European thermal fleet, it said.

The generator reported 2021 thermal generation volumes up 47% year on year to 16.53 TWh, and renewable volumes up 5% to 5.01 TWh.

Adjusted revenue of $1.73 billion was up 38% year on year while adjusted gross earnings were up 17% to $842 million. Net profit climbed 176% to $80 million.

In Europe, ContourGlobal owns the 908-MW Maritsa East 3 coal plant in Bulgaria as well as the Arrubal CCGT. It has solar assets in Spain and Slovakia and wind farms in Austria. Globally it has 4.5 GW of thermal capacity and 1.8 GW of renewable capacity.

Solar PV and solar CSP factors of 14% and 19% respectively were relatively stable year on year, as was an Austrian wind capacity factor of 23%.