Out-Law / Your Daily Need-To-Know

RWE renews calls for EU energy reform as it confirms more power plant closures

Out-Law News | 15 Aug 2014 | 2:40 pm | 2 min. read

German utility RWE has announced plans to decommission around 1,000 megawatts (MW) of generating capacity by 2017 because of a “significant deterioration in prices on the wholesale electricity market”.

The company said it will also terminate further supply contracts for the use of around 500 MW capacity and has warned that security of energy supply will be increasingly “at risk” unless the European Union’s energy sector is reformed.

RWE, part of a group which is one of Europe’s five leading electricity and gas companies, made the announcement as part of its financial report for the first-half of 2014. The utility said net income fell by 32% to €3.4 billion compared to the first-half of 2013, while the operating result was down 40% to €2.3bn.

RWE said the mild winter and resulting low demand for heating, together with the continuing low level of prices on the electricity markets, led to the “significant decline” in earnings for the first half.

However, RWE chief executive officer Peter Terium said: “Conventional power generation is losing ground, not just at RWE.” He said figures from Germany’s Federal Network Agency, the regulatory office for electricity, gas, telecommunications, post and railway markets, “indicate that up to 2018 more secured power station capacity will have to be taken offline than is added through capital investment”.

Terium said: “This does not bode well for security of supply, to which wind and solar can make little contribution.” He supported a market design “which compensates companies that keep secured generation capacity on tap”.

Terium said: “With a capacity market that is non-discriminatory and open to all technologies, Germany could create an economically feasible basis to continue to operate indispensable generation facilities, and thus supplement the expansion of renewable energy.”

However, Terium said “we will not rely on the actions taken by the government... the command of our business and our commercial success mainly depends on us”.

RWE’s announcement of further power plant closures takes the generating capacity of plants that the group is either totally or partially taking offline in continental Europe, or no longer utilising on account of difficult market conditions for conventional power generation, to around 9,000 MW.

In the UK, the RWE group’s generating capacity will be reduced by around 5,000 MW by the end of March 2015 as a result of environmental regulatory requirements.

RWE is a member of the ‘Magritte Group’ of major European energy companies (2-page / 352 KB PDF) which claims that energy policies of European Union institutions and member states are threatening energy security, increasing CO2 emissions and acting as a “disincentive” to investments. The group is calling for “a more harmonised European energy policy, greater interconnections, increased competitiveness and greater stability and regulatory visibility in order to provide customers with access to clean and reliable energy at a competitive price”.

The Brussels-based pan-European representative association for the electricity industry in Europe, Eurelectric, said in a report published earlier this year: “The transition to a decarbonised economy requires dramatic changes to Europe’s electricity system: from a world of large-scale generation to one in which power generation is becoming more decentralised, greener, but also more dependent on the availability of sufficient wind and sun.”

Eurelectric said: “This change requires massive investment, €1 trillion by 2020 according to the International Energy Agency, yet the transition is not happening smoothly. While wholesale prices have stabilised, prices for households and for small and medium businesses are sky-rocketing.”

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