As chief executive of E.ON Generation, Dr Bernhard Fischer has to juggle the impact of greater renewables on conventinal generation, withdrawing from nuclear in Germany, and looking for fresh opportunities in emerging markets. Ahead of his keynote address at POWER-GEN Europe he talks to PEi.
PEi: E.ON’s chief executive said in March at the company’s annual results that the company was “past the worst”. What are your hopes for this financial year for E.ON Generation?
|Fischer: I would rather focus on our future plans instead of hopes. Our plans for this year are heavily influenced by the fact that we, as E.ON, are in a phase of reorganisation and optimisation. This is especially true for E.ON Generation’s business. To optimise the rapid changes we are seeing in the markets and societies where we operate, we have developed our organisational set-up and our generation portfolio to manage the challenges successful.|
|Dr Bernhard Fischer, chief executive of E.ON Generation GmbH|
PEi: What effect has the German government’s stance on nuclear had on E.ON’s own nuclear plans and policy, both domestically and elsewhere in Europe?
Fischer: Domestically this seems very clear to me. There is a clear politically defined end for nuclear energy in Germany. Having been the biggest nuclear producer of electricity, this has tremendous impact on our income situation and affects thousands of our employees. Elsewhere in Europe there are still viable options for nuclear. In Sweden we remain committed to being a top-in-class operator of nuclear power plants and in Finland we are still pursuing the option to build a new plant.
However, in the UK we have taken the decision – along with our partner RWE – to step back from our Horizon plans in UK. We are now exploring options for this project which we believe are attractive.
PEi: E.ON’s withdrawal from the Horizon Nuclear Power joint venture in the UK surprised many in the industry. Is E.ON no longer confident, despite government reassurances that the UK’s nuclear new-build programme will go ahead?
Fischer: Our decision was economically motivated – not politically.
Nuclear power needs very long-term and very large capital investment. For the UK we have decided to focus on other strategic projects that will deliver earlier benefit for customers and our company. In the UK, we are focusing on renewables, energy efficiency and distributed energy.
How supportive is E.ON of plans emerging from Brussels to create an integrated European energy market and how realistic do you believe current European energy targets are?
Fischer: To make the transformation to a more climate friendly and more efficient energy system happen, we need significant investments and a robust European internal energy market. Policies such as the EU’s 2050 Energy Roadmap or Horizon 2020 will be crucial in setting guidelines which secure investment and meet both EU and country targets. We welcome the EU Roadmap as the first true European long-term approach and support the EU goal for a completed and integrated European internal energy market by 2014.
PEi: The current expectation in Europe is that gas fired power generation sector will be the major winner over the next 10-15 years. Do you agree with this view? How important will the exploitation of its shale gas reserves be?
Fischer: Whether or not gas fired power generation profits from the current situation is a question that in the end will be decided by economics. For the moment there are no capacity needs, but the question is how to stabilise a system with growing infeeds from fluctuating renewables. As long as there is no system which ensures adequate returns, there will be no new investment.
PEi: E.ON has a large fleet of coal fired power plants in Europe. What are its plans for the development of its coal fired assets over the next 10-15 years in light of plant retirement and forced plant closures due to the EU’s Industrial Emissions Directive?
Fischer: We still see a long-term perspective for conventional generation and especially for highly efficient gas and coal fired power plants in Europe, although the market share will not be the same as in the past.
Don’t get me wrong: E.ON is heavily committed to renewables. We will invest €7 billion ($9 billion) in renewable projects during the next five years. This is our contribution to the changing energy markets and our proof that we want to shape the present and future energy system. But to enable us to cross the bridge to this renewable energy system of the future, we will continue to need conventional generation for some decades as a solid backbone of our energy supply.
Our efforts to increase our renewable portfolio are not a contradiction to that. By investing in renewables and maintaining conventional generation capacities we ensure a well-balanced energy mix which can and will pave the way to a secure and renewable energy future.
PEi: E.ON’s CCS activities are currently centred on the Maasvlakte project in the Netherlands. What are its plans for the further development of CCS? Where are they likely to be located?
Fischer: We believe CCS can become an important step in the transition to a low-carbon generation mix. But there are still significant regulatory, technological and economic hurdles to overcome before CCS can be deployed on an industrial scale. We’re promoting CCS Research & Development by partnering with universities and by testing carbon-capture equipment at several of our power stations. We want to learn from our Maasvlakte and other CCS activities. At the same time we observe very carefully the political discussions. It’s too early to say much more.
PEi: E.ON currently has an installed hydroelectric capacity in excess of 6000 MW in Sweden, Germany, Italy and Spain. What are its hydropower development plans over the next 10-15 years? How important a role can hydropower, particularly pumped storage, play in backing up renewables such as wind and solar?
Fischer: There are still expansion opportunities for our hydroelectric activities across Europe – even though we must confess that the major options are more or less ‘in use’. Research & Development will continue to play an active role in exploring pumped storage as a back-up solution for intermittent renewable generation.
E.ON is very active in investigating and testing options in this field. And you might know, we are planning to invest in new or enlarged pumped storage. How important this may be in, say ten years time, is impossible to say. There are many more ‘back-up’ options to put to the test which could help stabilize our energy systems.
We must pursue each one of these options in order for us to be prepared for the optimal energy mix of the future.
PEi: Is Europe’s current grid infrastructure up to the challenges presented by the changing energy landscape, such as the greater integration of renewables? How badly does Europe now need to develop Smart Grid infrastructure?
Fischer: Obviously the current grid infrastructure will not be able to cope with the upcoming challenges. It was constructed for a completely different energy scenario.
And now it takes time and a lot of money to change and adapt the system.
Germany with its fast growing generation from renewables could be some kind of a ‘field test’ because the grids already are being developed and improved in order to ensure proper management of more and more fluctuating generation. E.ON, as one of the leading distribution grid operators, actively supports this development.
PEi: To what extent does E.ON believe that greater opportunities for all forms of power generation development exist outside Europe rather than within it?
Fischer: We do have a global focus. Part of our strategy is to increase our activities outside Europe in defined focus markets like Russia or Brazil where we can make use of very attractive business opportunities. These economies grow very fast whereas European markets are more and more stagnating.
They also have a massive need for new generating capacity to meet the rising electricity consumption and are open to new entrants.
Nevertheless Europe remains our home market and we are investing in renewable energies like offshore wind significantly.
PEi: Following E.ON’s recent joint venture with MPX, which creates the largest private energy company in Brazil, how big are the opportunities for foreign companies in South and Central America?
Fischer: That depends on the quality of partners you can find. And it’s different from country to country. Brazil offers the very special opportunity to invest in one of the fastest developing, politically stable countries with a huge domestic market.
In addition, the regulatory system in the Brazilian electricity market offers attractive stable returns for investors in a dynamic and growing market. And we are very pleased and proud to have found a partner in MPX.
PEi: As well as South America, E.ON is targeting business in India and Turkey. What is attractive about these two particular markets, and where else outside Europe do you hope to see E.ON entering in the next few years?
Fischer: For the time being we are focusing our activities to the three markets you have mentioned. Like Brazil, India and Turkey have fast growing economies and with that the demand for energy increases rapidly. In these markets our expertise in all forms of energy production is highly appreciated.
Dr Fischer will speak at the joint Opening Keynote Session of POWER-GEN Europe, Renewable Energy World Europe and Nuclear Power Europe in Cologne on Tuesday 12 June, beginning at 9.30 am. Dr Fischer will share the keynote stage with Philip Lowe, director general for Energy at the European Commission, and Dr Michael Sub, chief executive officer of Siemens Energy Sector.
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