Importance of renewable power generation in the German energy mix

Hi Readers,

You will find in this blog articles translated from the French press about the energy sector in France and European countries. The posts will appear twice a week. They cover the oil and gas sector, together with the nuclear and renewables ones. There are also additional resources. Enjoy reading.

"Les Échos", DEC. 31st

In Germany, renewable generated power ranks first

THIBAUT MADELIN  CORRESPONDENT IN BERLIN – ON DEC. 29th

In 2014, renewables accounted for 25,8% of the power production in Germany. Nevertheless, lignite and hard coal generation rank first together

In 2014, according to the figures released by the power industry Federation (BDEW, German acronym) Monday, renewables became the first source of power generation in Germany.Renewables part in the energy mix reached a 25,8% record, after a 24,1% level in 2013. Thus renewables rank first before lignite and hard coal, accounting for 25,6% and 18% respectively. Both coals represent nonetheless the first source of power generation and account for 46,6% of power in Germany.

According to the federation, “carrying on developing regenerative plants combined with mild temperatures explain why renewables reached such record”. Whereas wind energy hardly progresses and hydraulics even reduce, solar production increases by nearly 14%. But the relative growth of green energies in the German “mix” comes mainly from a production and consumption reduction, because of particularly mild winter temperatures. To date, production decreased from 3,6%, amounting to 610,400 gigawatt-hours. These figures prove the progress of the energy transition, which expects a nuclear moratorium by 2022 and a fossil energy moratorium by the long term.That’s good news for the thousands owners and farmers, who installed photovoltaic panels on their roofs or wind turbines in their fields. But it represents a bad deal for traditional power companies, such as E.ON or RWE, which thought to be able to resist to renewables growth a long time and which are compelled to modify their strategy.For the government, these new statistics give a new push, as the reduction of power generation allows a reduction of carbon emissions. Highly polluting coal plants have been less used. “I bet on a 3% reduction of carbon emissions in Germany this year, said Barbara Hendricks, the Environment Minister. Protecting climate comes back on a good track.” Indeed in the last years, emissions progressed regularly.

Expected decisions in the field of energy mix in Germany

As the government may enjoy the first renewables taxes reduction in 2015, there are three main thorny points: supply security, climate protection, and high tension lines development, which is on the verge to fail because of residents’ mass demonstrations. All these points feed the need for reform expressed by the Economy and Energy Ministry… but they represent very thorny issues.

Supply security may trigger again the debate about power costs, which were an important issue during the 2013 poll campaign. This point arises various thorny topics on the backstage: would it be good to award a complementary income for power plants to make them available in case of demand peaks? Is it a good direction to close coal plants, which are highly polluting but competitive? Closing a plant is easier than building one, as shows the Bayern Land refusal to build the future high tensions lines the Land needs, according to the government.

Useful links about renewables in Germany:

Read more in this blog:

http://energygeopole.blogspot.com/2014/12/european-energy-leaders-forced-to-take.html

http://energygeopole.blogspot.com/2014/12/european-energy-leaders-forced-to-take.html

Going further...

https://www.bdew.de/internet.nsf/id/EN_About-us

http://www.germanenergyblog.de/?p=17191#more-17191

http://www.carbonbrief.org/blog/2013/07/the-energiewende-transforming-germany%E2%80%99s-energy-sector

The European energy sector is facing a revolution in models and strategies

Les Échos, Dec. 19th

Courtesy 4.bp.blogspot.com

E.ON, GDF Suez, EDF’s models:  marching on the new revolution in the energy sector

VERONIQUE LE BILLON / DEPUTY SERVICE MANAGER AND ANNE FEITZ / REPORTER, ON DEC. 19TH

In order to solve its crisis, E.ON, Germany’s number one, made a radical turn by splitting its activities in two parts. Would GDF Suez and EDF, France’s energy giants, avoid such a upheaval?

By Anne Feitz and Véronique Le Billon, journalists in the Industry service

Two weeks ago, when E.ON announced that the company intended to split its activities in two parts, it aroused various interests in the market and made its competitors think about the future of their strategies. Indeed, E.ON’s solution is radical: this strategy consisted in grouping its conventional assets – particularly its nuclear, gas and coal plants – within a company rated separately, in order to focus on a new E.ON based on renewables, grids and energy services. Not only E.ON’s growth has been hampered by Germany’s decision to go out from nuclear, but  also common conditions faced by all European energy actors worsen the situation: the decrease of energy demand, then the competition of renewables and low cost coal finally the volatility of power price. Would GDF Suez and EDF, France’s energy giants, escape such a upheaval?

Confronting this difficult position, GDF Suez announced radical measures to start with the new year: Gérard Mestrallet’s group decided to depreciate its European thermal plants and storage sites by €14,9 billion suddenly, thus amounting to a dramatic net loss of €9,7 billion in its 2013 statement. According to the CEO, this measure intended to depreciate “the older era” in order to focus on energy transition in Europe (namely on renewables and energy services) and on development in growing countries. That’s a two-speed strategy, which may go further, according to several analysts. “GDF Suez would do better if it gives the choice to investors between several rated entities, which would herald different level of risk (such as stable revenues because of regulated tariffs, growth on emerging markets, then free energy markets), as E.ON is trying to do”, said Michel Debs, analyst by Crédit Suisse. Nevertheless, it’s too early now. “We have activities and production projects of thermal and renewable energy everywhere in the world, it’s highly logical to keep the integrated model of the group”, the group retorts. Moreover GDF Suez is not in the emergency situation E.ON is facing right now: Cofely, the group’s subsidiary positioned in services, has already recorded a €15 billion turn-over. Since the buying out of International Power, the company has boasted strong positions on the international market: 55% of its produced power is produced out of Europe. “The group did not waste time to build its strategy, it’s credible abroad and has a true experience”, says Arnaud Leroi, associate by Bain & Company.

On its side, EDF enjoys its position of quasi monopoly either in power production or in distribution, together with central regulated tariffs. “There is a French exception, because we are positioned on a “cost plus” model: we take the costs, we add them then we add a margin. Thus there is no particular problem”, deems an expert of the sector. EDF’s facility park will be fully working whatever happens: whereas solar and wind energy, whose production takes profit of a purchase obligation and whose marginal production cost is nearly non-existent, the nuclear park and hydraulic power plants record very competitive costs and they compose the main part of EDF production facilities.” The strategy will be revised if we enter the era of consumer-producer or in the time of micro networks, but this situation looks very unlikely in France up to ten or fifteen years”, said Michel Debs.

Nevertheless, EDF is confronting the contradictory orders of a protean State: supplying the less expensive possible power – even by suffering from a tariff deficit, invest, hire and maximize the dividend… above all that, by abiding by European directives of market liberalization and according to a new-born constraint: reducing the nuclear part in power production from 75% to 50% by 2025. With the cancellation of regulated tariffs for professionals within one year, EDF may also loose some market shares. Furthermore, the new way to calculate tariffs for households now is based on market price, which is a bearish condition which weighs on EDF’s profitability. “France’s position is quite under pressure to consider different options, but the country does not need to find solutions in a hurry. Maybe if EDF intends to reduce its investments, things may happen”,  says an analyst.

In order to avoid a crisis in the sector, both French groups try to reduce their exposition to market risks in a similar way. In the joint-venture dedicated to build two EPR in Great Britain, EDF intends to limit its investment up to 45 or 50% in order not to consolidate this stake in its accounts. The company will do the same within Amundi, the subsidiary for developing renewables. Then GDF Suez has followed the same scheme in inviting partners in projects located in Canada, Brazil and Australia, and in the field of renewables in France, to avoid consolidating these investments and reduce its indebtedness. Moreover, energy groups are looking for guaranteed incomes: for instance, in Great Britain, EDF has dealt a  guaranteed price for the power the company will produce during thirty five years, which will warrant a kind of pre-existing profitability similar to that produced in a quasi-infrastructure. GDF Suez and EDF investment in marine wind energy, which benefits from a purchase obligation, enables also the companies to collect fixed revenues on the long term. Finally and even if GDF Suez is ahead of EDF in this field, diversifying in services will allow them to get a lower risk profile with an activity deemed less profitable but far less demanding in capital than the other activities in their portfolio. 

Anne Feitz

Journalist in the Industry service

Véronique Le Billon

Journalist in the Industry service

Some important points

As Germany’s E.ON announced a change of model in early December, in order to focus on renewables, grids and services, this revolutionary position leads other competitors to revise their own strategies.
Facing the same difficult environment as E.ON, GDF Suez already announced radical measures for the new year, by depreciating nearly €15 billion on its European thermal plants and storage sites.
Even if EDF seems quite protected by the quasi monopoly the company detains on either power production or distribution, and also by regulated tariffs, the growth of decentralized means of production will lead the company to strategic changes sooner or later.

Courtesy coswhielec.co.uk

Read also about E.ON and Germany energy difficult choices:

http://energygeopole.blogspot.com/2014/12/germany-faces-dilemma-of-carbon.html

Going further.... European energy sector, renewables, conventional assets...

http://www.europeanenergyreview.eu/site/pagina.php?id=4162

http://www.germanenergyblog.de/

https://fortumforenergyblog.wordpress.com/category/eu/eu-energy-policy/

Germany faces the dilemma of carbon emission reductions

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"Les Échos" December, 3rd

THIBAUT MADELIN / CORRESPONDeNT in BERLIN 

·      

The energy sector shall save additional 22 million tons of carbon dioxide, to be added to the 71 million ones scheduled up to 2020. Rainer UNKEL/REA

The government keeps its targets, but gives up the idea to close coal power plants.

How is it possible to keep its credibility about its awareness on climate change without weakening its energy sector, already facing a structural crisis? That’s the dilemma faced by the German government, which unveiled a list of projects ultimately dedicated to save its targets of carbon dioxide emission reductions Wednesday.

The main part of the reductions (namely 25 to 30 million tons) shall come from energy efficiency measures, for instance tax subsidies dedicated to real estate park renovation. The transport sector shall reduce its carbon emissions from seven to ten million tons, particularly through a toll increase for most polluting trucks. Drivers will thus been given some trainings to use less fuel and agriculture shall play a role by using less fertilizers.

Besides these sectors, it’s the energy field whose contribution will be the most questionable. According to reduction framework, this sector shall save additional 22 million tons of carbon, to be added to the targeted 71 million up to 2020 previously. In 2013, the energy field emitted 377 million tons of carbon dioxide.

Germany experienced an increase of its greenhouse gas emissions during 2012 and 2013, even if the country intended to set the example. Growing coal power plants use accounts for the main part of this point, supplying 45% of the country’s power generation. Without any new step, the country won’t reach its 40% reduction target from 1990 to 2020. So Angela Merkel is facing a credibility problem, as she likes to be presented as the “climate chancellor”. “ I don’t believe that Germany may give up its targets”,  Sigmar Gabriel said, as  Economy and Energy Minister.

Thousand job losses since five years

What a thorny perspective. After considering a possible close of coal power plants, the government gave that idea up (see “ Les Échos” dated October, 10^th), in order to avoid the weakening of a sector facing a sharp drop of power price. Now it counts on the voluntary steps taken by operators. “ I don’t care to know how a company will contribute to the 22 million tons, Sigmar Gabriel said Wednesday. In which plant, following which efficiency measures, by reducing the production of one plant and by increasing the production of one other? That’s corporate decisions.”

Nevertheless, the point shall be raised in the wake of the law to be passed in 2016 about the new frame of the power market. Power majors claim for an additional fee for their conventional power plants. Sigmar Gabriel is concerned that this claim would lead to new price increases, but that’s a touchy issue for him. In fact, E.ON, RWE or EnBW have suppressed thousand jobs since five years.

Former Environment Minister, Sigmar Gabriel focuses on employment as a priority. As he has been asked to be the SPD candidate to the chancellery in 2017, he listens carefully to the trade-unions campaign and launching a petition claiming for “an energetic change without any risk for employment and without any political sharp price increases”.