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Germany’s $132 Billion Green Energy Lead Is Fortified by EON’s Split With Fossil Fuels

Photographer: Hannelore Foerster/Bloomberg

A crane operates inside the coal storage hall at the EON AG Staudinger coal-powered power plant in Grosskrotzenburg, Germany.

EON SE (EOAN)’s plan to spin off its fossil-fuel plants marks a watershed moment in Germany’s renewables effort that will likely bolster the country’s already leading position in clean energy.

EON’s announcement is the culmination of a push to wind, solar and other alternative energy forms that the German government began 14 years ago with subsidies to reduce the country’s reliance on fossil fuels for power production. That plan gained added momentum in 2011 with a decision to close the country’s nuclear reactors following the Fukushima accident.

Chancellor Angela Merkel’s bold move is already beginning to pay off, with Europe’s largest economy for the first time getting more electricity from renewables this year than any other source. About a quarter of Germany’s power now comes from green energy, compared with 6.2 percent in the U.S. and 4.8 percent in France.

“We are in the midst of a giant transformation process of our energy system,” Deputy Environment Minister Jochen Flasbarth told reporters yesterday in Berlin. “Renewables are the increasingly dominant factor in the German energy mix. EON’s decision is a piece of the puzzle.”

The government intends to go further, setting goals to increase the use of alternative energy sources to as much as 45 percent of all power generated by 2035 and boost that figure to 80 percent by 2050. Germany, where the eastern countryside is already dotted with thousands ofwind turbines, plans to do that in part by expanding large-scale offshore wind plants that can produce more reliably because the breeze is steadier at sea.

Photographer: Krisztian Bocsi/Bloomberg

Germany this year for the first time got more electricity from renewables than any… Read More

Closing Reactors

Merkel decided after the Fukushima accident in Japan to close the country’s eight oldest nuclear reactors and shutter the remainder by 2022. To reach stricter climate protection targets, Germany tomorrow will unveil details of a plan demanding additional emissions cuts from electricity produced using fossil fuel.

“Germany has some of the most ambitious climate protection targets and is radically rebuilding its energy system,” said Sven Diermeier, an analyst at Independent Research GmbH inFrankfurt who follows EON and rival RWE AG. “And now EON is attempting the most radical rebuilding so far of any large European utility.”

Germany’s push has come at a cost for the country’s utilities, energy-intensive industries and consumers. The influx of renewable power on the grid has undermined wholesale prices and decimated the profitability of coal and gas plants. At the same time, the taxes on electricity that subsidize renewable energy production has led to Germany having the second-highest household power prices in the European Union, according to Eurostat.

Subsidies

German consumers have paid a total of 106 billion euros ($132 billion) through the surcharge on their power bills to finance the clean-energy expansion. The annual cost may peak this year and drop slightly to 22 billion euros in 2015 as the government begins reducing subsidies for the industry.

Despite the expense, the shift has broad public support. A poll earlier this year showed 71 percent of Germans back the decision to close the nuclear reactors and 67 percent think the country isn’t doing enough to move to renewables, according to the Allensbach polling company.

Against this general backdrop, power companies in Germany are increasingly staking their future on green energy. EON after the split in 2016 will concentrate on renewables, distribution and marketing to households and consumers. The spun-off entity will include conventional power generation, global energy trading, exploration and production.

Renewables Focus

“There’s a new world becoming reality that’s driven by customers,” EON Chief Executive Officer Johannes Teyssen said today in Berlin of the plan to split the utility.

Vattenfall AB, owned by the Swedish state, wants to get rid of its German coal operations to focus on renewables, while ENBW Energie Baden-Wuerttemberg AG (EBK) last year doubled its asset sales goal to 3 billion euros to free up cash to invest in clean energy. RWE, Europe’s biggest corporate emitter of greenhouse gases, said yesterday it didn’t plan to follow EON’s lead. RWE last year generated more than half of its power in Germany with lignite, the dirtiest fossil fuel.

“Spinning off coal, gas and oil from the core business is a smart strategy for a future-oriented company,” said Patrick Graichen, head of Agora Energiewende. “I’m sure additional utilities will follow suit — not just in Germany, but worldwide.”

Electric Cars

Merkel is also trying to reduce the country’s emissions by pushing Germany’s auto industry to build more electric cars after French, Japanese and American carmakers got off to an early lead. Including vehicles like Bayerische Motoren Werke AG’s i3 city car and an electric version of Daimler AG’s Smart two-seater, German auto manufacturers will offer 17 electric-powered models by the end of 2014, and another 12 will be going on sale next year, according to the country’s VDA automotive industry group.

The chancellor today threw her support behind incentives to reach her goal of having 1 million electric cars on German roads by 2020. The country is behind on the effort in part because the government has previously balked at subsidies like those offered in France, where consumers receive as much as 6,300 euros to help cover the higher cost of low-emission vehicles. Electric car sales in Germany last year amounted to about 7,600 vehicles, while in France demand was almost double that at 14,400.

“There’s a lot to do,” Merkel said during a press conference in Berlin. “We see that further subsidies are necessary. We must speak with the German states about that.”

 

Source: Bloomberg

German MPs adopt cuts for green energy subsidies

Berlin (AFP) – German lawmakers adopted a law on Friday to reduce renewable energy subsidies as the government seeks to keep its green “energy transformation” on track, curb rising prices and fight nagging criticism.

The reform of the “Energiewende” is one of the first big projects of Chancellor Angela Merkel’s third term, together with a national minimum wage, and has been a political hot potato both in Germany and with the European Commission.

The reform of the “Energiewende” is one of the first big projects of Chancellor Angela Merkel’s third term © AFP/File Frank Zeller

The reform of the “Energiewende” is one of the first big projects of Chancellor Angela Merkel’s third term
© AFP/File Frank Zeller

The law, overwhelmingly approved in the Bundestag lower house of parliament, aims to provide new impetus to the energy shift under which Europe’s top economy plans to meet 80 percent of its energy needs with renewables by 2050.

“We’re reducing the costs and that is also urgently needed,” Energy Minister Sigmar Gabriel told MPs.

Merkel acknowledged this week that Germany was facing a “herculean” task, while Gabriel, who is also her vice-chancellor, said the energy transformation was increasingly being viewed with scepticism by the rest of the world.

Germany introduced a generous system of subsidies for green energies in the late 1990s, a move which has borne fruit — 27 percent of the electricity used in the first quarter of this year came from renewable sources — but is costly.

The subsidies are funded by a tax levied on customers’ electricity bills, which has driven up energy prices in Germany to count among Europe’s highest.

Under the new law, the subsidies will be substantially reduced from August 1, while producers of green energy will also gradually have to sell competitively on the market rather than enjoying priority treatment with guaranteed prices.

Merkel took the surprise decision in 2011 to gradually scrap nuclear power for renewables in the wake of the Fukushima disaster but has faced pressure over how to pay for the clean energy drive.

To offset the phasing out of nuclear energy and the time needed to build up renewable sources, Germany has also increased consumption of cheaper fossil fuels such as coal which has hit its image for environmental protection.

“A first step in the right direction,” cheered the BDEW federation, which represents conventional energy producers, while the reform is criticised by the ecologist Greens party, clean energy associations and environmentalists.

“Sigmar Gabriel is the wrecking ball which is damaging renewable energy here in this country,” Greens lawmaker Oliver Krischer said.

Berlin is also likely to face opposition from the EU Commission, which argues that a tax levied by Germany on imported electricity, including green forms, is, effectively, a barrier to free trade.

© AFP

Source: Magazine GoodPlanet Info