As Europe continues to be a challenging market for power generation companies and utilities, is RWE currently looking at opportunities outside of this traditional power market? And if so, what particular countries or regions are under consideration?
The focus of our electricity and gas business is and will remain on Europe. This is where we have established ourselves as a leading electricity and gas provider, and developed the markets that are most important to us. Since 2013, RWE Generation SE has been in charge of conventional power generation in the RWE Group. It bundles the generation units of RWE in Germany, the Netherlands, the UK and in Turkey, as well as the power plant construction business of RWE Technology. More than 16,500 people are working for RWE Generation and our portfolio covers a capacity of over 40 GW.
Last year, RWE announced plans to radically depart from its traditional business model based on large-scale, centralized thermal power production and instead become an ‘enabler’ in the renewable energy sector. Can you explain what that actually means and what it will entail? And how is that transformation progressing?
RWE has been pressing ahead with the transformation of its energy system for years to help make Germany’s Energiewende a success. We have significantly increased the share of renewable energy in our portfolio and invested a total of €8 billion in this area.
Today, RWE operates some 3000 MW through wind, biomass, hydro and new technologies throughout Europe, which makes it one of the top ten European producers of renewable power. In 2012 alone, renewable electricity generation in the RWE Group rose by 41 per cent to 12.4 billion kWh. At the end of 2013, the figure was 13.8 billion. Wind power is playing an important role here.
With over 470 MW of installed capacity, RWE is one of the largest onshore wind operators among German energy utilities. Once the offshore wind farms that are currently being built have started operation, RWE will be among the top three European producers with some 1000 MW of installed capacity in 2015.
The further expansion of renewable generation is an important pillar of our strategy, another being conventional generation. In this area, too, we boast cutting-edge plants and outstanding technical expertise.
But with the growth of renewable energy, the role of our conventional power plants is changing. We will increasingly become an efficient and flexible provider of capacity – capacity that is available and produces electricity when renewable energy does not meet demand. We are aligning our generation fleet with these changing requirements.
With Germany’s new coalition government now bedded down, power prices continuing to escalate – potentially threatening Germany’s global competitiveness – and the UK on the verge of a nuclear renaissance, do you believe that Merkel’s government might revisit its nuclear shutdown decision?
Germany has decided to phase out nuclear power. It goes without saying that we accept the primacy of politics. Even if our plants are counted among the safest reactors worldwide, I don’t expect any nuclear renaissance in Germany.
So nuclear has been banned in Germany. What is the outlook for fossil fuels, particularly coal?
We cannot do without conventional power plants in the long run even if the expansion of renewables is progressing. This is due to plain physical reasons: we will not be able to store large quantities of electricity at reasonable cost for some time to come. Therefore we need secure capacity, especially in the form of conventional plants, to replace non-secure capacity – wind and solar –if required.
Coal has an important role to play in this context. It stands for reliable and affordable power generation. A study by Deutsche Energieagentur indicates that gas and coal power plants will still have to provide some two thirds of secure capacity in 2050. This will be about 60 GW. With our efficient and flexible power plant fleet, we will continue to play a leading role in Europe in this area.
|RWE is “pressing ahead to make the Energiewende a success” says Hartung
Do you think change is being forced too quickly on the German and European power systems? Has the Energiewende been a success or a failure so far?
Looking backwards doesn’t help. Germany wants the Energiewende and the task at hand is to shape it in a way that allows equilibrium to be restored to the trilemma of supply security, environmental sustainability and affordability. Nobody had expected a renewables boom to this extent in Germany.
The federal Environment Ministry had originally forecast an increase in PV use of 6 GW by 2013. In fact, it is well above 30 GW today. And there have been similar developments in wind energy. This has upset the market in next to no time, wholesale prices have collapsed, operating hours of conventional plants have dropped sharply in places and, in 2013 alone, electricity consumers paid some €23 billion for the expansion of renewable energy.
How do you see the future for RWE Generation then? What will be the key to assure a successful business? What will Europe’s power sector look like in 2020 and in the remote future?
Again, it is important to note that RWE Generation is a crucial part of RWE’s value chain and its role is to operate RWE’s conventional power generation fleet in the most economically efficient way, to supply baseload electricity and offset volatile renewable power production by providing flexible generation capacity. RWE Generation, specifically, with its diversified power plant portfolio, is very well equipped to meet the challenges arising from the upcoming transformation of power supply in Europe, namely security of supply, climate protection and higher flexibility requirements. We have an international structure with power plants in Germany, the UK and the Netherlands. With an investment of €12 billion in total in the last few years, of which more than a half was in new gas-fired power plants, we are one of Europe’s largest operators of highly efficient gas-fired power plants.
In every market within which we operate, however, we need underlying energy policy conditions to change to facilitate the economic operation of power stations. This requires the following adjustments:
1. We are convinced that Germany and other European markets have to implement capacity mechanisms as soon as possible in order to ensure that reliable power capacity is able to remain online for when it is needed.
As renewable power increases its share of generation in the market, conventional generation remains vital as backup for when conditions are not adequate to produce electricity from renewable sources. This means that a large proportion of conventional, dispatchable power generation is also required longer-term to ‘stand by’ in order to prevent system problems including blackouts. Currently our plants are not running often enough to recoup the costs of investment and operations in an energy-only market. A capacity mechanism solves this problem by creating value in the ability to dispatch required generation at any given moment as well as retaining value in the electricity generated.
2. Electricity needs to remain affordable – for citizens as well as for trade, industry and commerce. For this reason, we are convinced that renewable technologies must become part of the mainstream energy market as their share of generation in any market increases. This includes subsidies being lowered or removed when appropriate and each operating technology becoming subject to the same market risks.
And what needs to change to support Europe’s clean energy system?
I’m glad that you have posed this question because this is the third area where changes are required.
We strongly believe that the European Emissions Trading Scheme (EU-ETS) can still be the foundation of European energy and climate policy. We back the proposals of the European Commission to cut carbon dioxide emissions in Europe by 40 per cent by 2030. This creates security for investors, protects the environment and strengthens the trading scheme.
In contrast, we take a critical view of separate climate protection tools for power plants at a national level. They, by definition, are unable to contribute to climate protection because of the EU ETS overall emission ‘bubble’ effect, and thus can distort markets and drive up the costs of climate protection.
Matthias Hartung is one of the Keynote speakers at this year’s POWER-GEN Europe Conference & Exhibition, which is taking place in Cologne, Germany, 3-5 June 2014. For more information, please visit www.powergeneurope.com.
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