RWE CEO in blackouts warning
Peter Terium, the chief executive of Germany’s second-biggest utility RWE, has warned of blackouts in Germany and power bottlenecks across Europe as a result of a German energy policy that pushes fossil-based generation out of the market.
In a dramatic interview with the Süddeutsche Zeitung newspaper, Terium reiterated his call for subsidies for idle fossil fuel power plants – just as coalition talks between the party of Chancellor Angela Merkel and the Social Democrats (SPD) are about to discuss details of the Energiewende, Germany’s turnaround from nuclear to renewable energy.
The energy talks starting Thursday are led by environment minister Peter Altmaier from Merkel’s Christian Democrats (CDU) and the SPD’s Hannelore Kraft, the state premier of North-Rhine-Westphalia.
The state, Germany’s most populous with 18 million inhabitants and home to RWE’s headquarters, is suffering from the demise of the coal industry that Kraft has pledged to protect.
RWE in recent years became highly indebted by investing some €12bn ($16.5bn) in new, mostly fossil power plants that now often lay idle due to the massive entry of cheap renewable energy into the electricity wholesale market. Some 30% to 40% of those plants are making losses, Terium added.
The utility in August said it will switch off 3.1GW of fossil capacity by 2016 in part or entirely, on top of having to take 4GW of nuclear capacity from the grid by 2022.
As much as 10GW of capacity across Europe is “under critical observation,” Terium added. “The entire continent is manoeuvring itself into a tense situation. The situation was already critical during the past two winters,” Terium tells the newspaper.
“I’m worried where this is leading to,” he said, adding that his company wants to avoid blackouts at any price. Germany’s electricity pricing system is at the centre of Terium’s critique.
Renewable energies, despite being subsidised by a surcharge on electricity bills via feed-in tariffs (FITs), enter the wholesale power exchange at a production cost near to zero.
On days of plentiful sun and wind, that has the effect of pushing the most expensive energy sources – usually gas and sometimes also coal – out of the market at the exchange, bringing down overall prices.
That effect leads to losses for utilities that are heavily invested in gas and coal, which in consequence are forced to take fossil power capacity off the grid to avoid even greater losses.
The CEO said RWE’s earnings as a result of the fossil crisis will “sink dramatically,” forcing the company to implement further savings measures.
At the same time, he admitted that his company has entered the renewables business too late. Terium said politicians now need to develop a new electricity market system that supports utilities for leaving idle fossil power stations on stand-by to be switched on on days without sun or wind.
Otherwise “the lights will go out in Germany,” Terium predicted. Energy policy has become so important that it requires a large democratic majority, something that a “grand coalition” between the CDU and the SPD can achieve, he added.
It is likely that RWE and the coal industry can count on Kraft’s support during the coalition talks.
It is likely that RWE and the coal industry can count on Kraft’s support during the coalition talks on energy after the state premier had said the Energiewende mustn’t lead to job losses.