Germany's decision to phase out nuclear power and remain low-carbon is already shaking up the energy sector, Thomas Kaestner reports.
Germany's decision to renounce nuclear power (see inset box) has started an energy transformation known as Energiewende. This policy shift is already having an impact on business models across the P&U sector, and is creating new opportunities for those with agility and access to capital.
While there are a number of far-ranging, long-term implications, we are already seeing some immediate impacts from Energiewende:
- Business models: Organizations earning revenue from nuclear must review organizational structures and business models to create new revenue sources. The "Big Four" energy companies in Germany are undertaking huge restructuring programs and increasing pressure on regional utilities to increase efficiency.
The "Big Four" utilities in Germany
- E.ON AG
- RWE AG
- Vattenfall Europe AG
- EnBW AG
- Divestment of the high-voltage grid: this began in 2011, and EnBW is expected to sell its share. The government would still like the formation of a German grid company.
- Investment in renewables, especially offshore wind, to make up the shortfall in generation, and related opportunities in terms of exports, development, technology and jobs.
In the longer term, the net effect of this policy change is that Germany, for the first time, is likely to become a net importer of energy, opening opportunities for its neighbouring countries to export energy to Germany.
Germany's on-again-off-again relationship with nuclear power
Germany's decision to invest in nuclear energy was late compared to that of other industrialized countries, with the first commercial reactors beginning production in the mid-1960s. Since the mid-1970s, the anti-nuclear movement has enjoyed popular support, with its slogan, "Nuclear power? No thanks," currently echoed in an ad by the Ministry of Economy: "Power plants? Yes please!"
|Nuclear power? No thanks||Power plants? Yes please!|
Following the March 2011 Fukushima disaster, German Chancellor Angela Merkel announced a three-month moratorium for the seven oldest reactors and an immediate review of the rest. Last summer, the government decided to end nuclear power generation in Germany by 2022 at the latest. "We learned from Fukushima that we have to deal differently with risks." Merkel said15.
At the time of the announcement, nuclear power accounted for 23% of Germany's gross power generation and nearly 48% of baseload electricity generation.
The Government intends to make up the shortfall in generation with renewable power (which accounted for 12%-15% of generation in 2011) and by improving energy efficiency. "We believe we as a country can be a trailblazer for a new age of renewable energy sources." Merkel said16.
The case for renewables in Germany
Germany is learning the economic impact of the difference between installed capacity and operational capacity for renewable power. While it has nearly 60,000 MW installed capacity of power from renewable energy sources (RES), weather patterns make its operational capacity much lower.
According to statistics released by the Germany energy regulator:
- 1000 MW of installed nuclear power capacity outputs about 8.5 TWh (terawatt hours) a year, which means nuclear plants run nearly all year at full power
- Solar PV produces 0.8 TWh a year
- Onshore wind produces 1.5 TWh a year
- Offshore wind produces from 2.5 to 3.8 TWh
Offshore wind energy looks the most promising; a special €5 billion program for offshore came into force in June 2011 with an immediate impact. Two wind parks have already received financing commitments, and building permits have been obtained for 29 planned parks.
The Government's target is to install parks with a capacity of about 25,000 MW by 2030.
Massive RES investments make security of supply an issue because of stochastic input from RES to the grid. New balancing power plants and high voltage power lines onshore are needed to stabilize the grid and even out supply fluctuations.
Investment in grid connections for offshore wind is not keeping pace with planning applications, and unless this is addressed, power blackouts could result.
To realize short-term opportunities, companies will need to think out-of the box. This includes cooperation with old and new partners. We see a trend of increased mergers and joint ventures and foreign utilities conquering the German energy market, or financial investors bringing required equity.
The critical task for the next two years will be raising enough money for required investments which the German government-owned development bank KFW expects to be €250 billion until 2020.
Without access to capital, the dream of Energiewende cannot become reality.
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15"Nuclear phase-out can make Germany trailblazer – Merkel". http://www.bbc.co.uk/news/world-europe-13597627 (accessed 23 February 2012)