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Clean Power fossil fuel exit

Published on April 26th, 2014 | by Zachary Shahan

5

We Should Have Invested In Solar Sooner, CEO of German Utility RWE Says

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April 26th, 2014 by Zachary Shahan
 
No doubt about it: solar power has given German utilities a lashing. They cut wholesale electricity prices, which cuts into utility profits, and they also reduce electricity demand, further cutting into utility profits. Unfortunately (for utilities), they didn’t see it coming. They were caught in the same position many other companies have been caught when a disruptive technology came along — flat on their feat, complacent, and overconfident in their reigning power (no pun intended).

RWE, a German utility founded in 1898, has been one of the hardest hit. With a German policy move away from nuclear, RWE started burning even more coal (52% of its electricity supply in 2013 compared to 45% in 2011). It got only 6.4% of its energy from renewables in 2013. It didn’t think, “let’s get into this solar future now.” Largely as a result, in 2013, RWE posted its first annual loss since World War II. Since 1998, it has dropped 30,000 employees (net). (Note: RWE wasn’t the only European utility to get hit by the move towards renewables. While the broader stock market has grown 60% in the past 5 years, European utility stocks have fallen 12%.)

The Bloomberg story where I’ve found these facts doesn’t quite catch something else, however. Coal use has recently grown a bit as nuclear power plants have been shut down (and as planned power plants have finally been completed). Renewables have grown, but not yet enough to replace nuclear, natural gas, and coal. Nuclear has in many cases been shut down due to societal demand. Natural gas, unlike in the US, is often more expensive than coal in Europe. So, natural gas is being cut out of the equation to a larger and larger degree as renewables are growing. But next to go bust is coal.

fossil fuel exitCredit: Nuclear Energy Agency and the Organisation for Economic Co-operation & Development, via @SamHamels


In a merit-order pricing tier, once renewable energy grows a bit more, coal is going to be dead. Renewable energy’s market share of the German electricity sector last year was 24%, but what about when that rises up to 50% and 60%? Utilities relying on coal generation are going to be in a heap of trouble.

Peter Terium, RWE’s CEO, now says that the company should have invested in solar sooner. “We were late entering into the renewables market — possibly too late,” Terium said at a press conference in March. Not exactly something an investor wants to hear. But awareness is the first step to self-revival. RWE is now planning to invest more in renewables, in the electricity distribution grid, and in its retail business. It has also been selling off some of its fossil fuel (oil and gas) assets.

However, that’s not to say RWE isn’t still making coal-focused mistakes. “Still, RWE has no plans to back away from lignite,” Bloomberg writes. “The company is pressing ahead with plans to build a 1,100-megawatt plant at Niederaussem, near Germany’s border with Belgium. Planned to start operation in 2018, if it gets the final go-ahead it will cost cash-strapped RWE 1.5 billion euros ($2.1 billion) to build.” It’s very hard to see how that is considered an intelligent financial move for the company.

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About the Author

is the director of CleanTechnica, the most popular cleantech-focused website in the world, and Planetsave, a world-leading green and science news site. He has been covering green news of various sorts since 2008, and he has been especially focused on solar energy, electric vehicles, and wind energy since 2009. Aside from his work on CleanTechnica and Planetsave, he's the founder and director of Solar Love, EV Obsession, and Bikocity. To connect with Zach on some of your favorite social networks, go to ZacharyShahan.com and click on the relevant buttons.



  • No way

    Let’s hope this will help them to start getting their level of fossil fuels down. Maybe even start catching up with the top half of EU one day.

    • Bob_Wallace

      If other European countries were not purchasing electricity from Germany’s fossil fuel plants Germany would be a lot more “caught up” than you might expect.

      • No way

        Their 3% net exports of electricity wouldn’t make much change. They are still way off being in the top half in EU.

        • Bob_Wallace

          Where are you finding current CO2 per capita data?

          • No way

            I’m not looking at CO2 per capita. I’m looking for example at fossil fuel as a percentage of electricity production and at renewables as a percentage of total energy.
            If I would look at CO2 per capita then the best source I have is the Eurostat from 2011. The other numbers are from 2012 and I hope they soon have compiled them for 2013.
            Newer stats will hopefully benefit Germany (and other late bloomers).

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