July 6, 2011
Germany

Energy: Betting the wind farm

By Gerrit Wiesmann, Financial Times, www.ft.com 3 July 2011

Charts and drawings bestrew the Hamburg office from which Eon, the power company, is choreographing the building of its first German offshore wind park. They give an idea of the scale of the country’s ambition to phase out nuclear energy and replace it with renewable sources in the next decade.

On the walls, schedules specify what is meant to be made when, and delivered where, by late 2013. Though poster size, none has space for the myriad further steps into 2014 when, after six years of co-ordination and construction, 80 turbines producing 300 megawatts of electricity are to go on stream. Or so the planners hope.

“Things are starting to happen offshore,” says Sven Utermöhlen, central Europe head of Eon Climate and Renewables, who is hoping for final approval soon from his parent group for the €1bn ($1.5bn) North Sea project, called Amrum Bank. “But building plants off the German coast remains a technical and economic challenge – costs can easily rise, deadlines can easily slide.”

Although the final steps towards completion have yet to be set out, Germans have to trust this complex dance will work not once but at least 25 times to render the 10,000MW of offshore power – half of the country’s nuclear capacity – that Berlin says Europe’s biggest economy will need by 2020.

The plan, devised by chancellor Angela Merkel after the March disaster at the Fukushima Daiichi nuclear power plant in Japan, is risky. Instead of closing the last of 17 nuclear plants in 2036, as agreed last year, they will now be shut by 2022. That forces the country quickly to find new sources for one-quarter of its electricity supply – the proportion of renewables alone is meant to double to 35 per cent, though gas will play a role too.

Experts reckon this conversion – which is meant to complement Germany’s existing solar and onshore wind plants with a big push out to sea – will cost €90bn-€200bn. Investment will eventually be recouped from electricity users through what the government promises will be only marginally higher prices.

Governments of the world will be watching. As most other advanced economies stick to nuclear power as the reliable, low-emission bedrock electricity supply, Germany will try to put itself at the front of the renewables charge, well exceeding targets set by the European Union for 2020. Yet this decade-long experiment to see whether a big economy can go green will take place in laboratory conditions that are far from ideal.

Plans to foster renewable energy have been the policy of successive governments for a decade, but arduous planning procedures mean that only 90km of the necessary 4,500km of high-voltage lines have been laid. Storing electricity for use on becalmed days is cumbersome with today’s hydropower plants, which can “store” supplies to last hours but not the necessary weeks and months.

Germany has only one working commercial offshore wind park and one operative but not quite completed project. Together, that will make 92MW of installed offshore capacity (a smallish nuclear plant renders at least 10 times that) – way behind the windy UK, which boasts about 1,300MW.

German wind turbine makers such as Siemens and REpower can therefore expect busy years, as can scientists working on storage. In Berlin last week, the Chinese premier Wen Jiabao said green technology already made Germany “a very important strategic partner”.

To lure industry and investors, Ms Merkel has peppered legislation for what she calls the Energiewende, or “energy switch”, with financial incentives and leaner planning procedures. These are meant to help companies to build the combination of wind parks, networks and electricity stores needed to replace the dependable baseload long provided by nuclear power and, for a while yet, by natural gas.

With the upper house of parliament expected to deliver final approval this Friday, many people on the frontline of Germany’s renewables revolution remain sceptical about Ms Merkel’s goals. They also see one obstacle that might prove bigger than current preoccupations with financing and authorisation: the public, who want renewable projects – just not in their backyards.

“Installing 10,000MW in 10 years?” Mr Utermöhlen muses. “A bit too ambitious.” The industry would have to complete two to three plants like Amrum Bank a year. “How many are being built at the moment? Two.”

With most of Germany’s coastline a national park, the industry was forced to plan sturdier plants out at sea. Amrum Bank will stand 40km offshore in 25m of water, while UK peers are much closer to land and in less than 10m of water.

With technology finally in place, financing will prove the bigger obstacle. Of the roughly 25 wind parks needed, Eon might build three or four, with other big German operators such as RWE and EnBW also doing their bit. That would leave a dozen or so projects to be tackled by groups of municipal power companies and other investors. “With banks lending maybe €50m each, you have to be prepared to deal with 15 or 20 of them,” Mr Utermöhlen says. “Project finance will remain a tricky business.”

He does praise Berlin’s plans to boost returns by raising the guaranteed price for wind power – the so-called feed-in tariff – early in a plant’s life. He also approves of planned loan programmes by KfW, the German development bank, and the EU’s European Investment Bank. But, he cautions, it will take a few years to find out whether that is enough.

Eon’s most immediate worry is whether network operators will connect offshore wind parks to the existing grid quickly enough. The recently activated Baltic 1 park, off the northeastern coast, was completed in 2010 but went on stream only this year. To avoid sinking millions of euros into redundant equipment, network providers have waited for plants to start construction before laying cables.

“It’s not possible to perfectly synchronise the building of wind parks and cables in the current framework,” according to Frank Golletz, head of 50Hertz, a company responsible for 10,000km of high-voltage grid in eastern Germany – and for the Baltic 1 delay. But Mr Golletz says they will act with greater alacrity than before, thanks to plans to compensate network providers if they lay cables to unrealised parks.

. . .

More problematic, however, will be retooling the national grid to pipe electricity from renewable energy sources in windy northern and eastern Germany to the big industrial centres of the south and west.

50Hertz has been working on a new east-to-west high-voltage connection from Schwerin near the Baltic to Hamburg near the North Sea coast for seven years. The pylons run 40km along the motorway between the two cities – and end abruptly where the state of Mecklenburg-Vorpommern meets Schleswig-Holstein.

“The planning procedure in Schleswig-Holstein takes a long time,” says Mr Golletz. “In Mecklenburg, you have to plant one tree for every tree you fell. In Schleswig-Holstein it’s three.” With some luck, what was finished in one state in 2010 will be completed in the other by 2012.

Planning decisions about important interstate power lines will in future be taken by federal rather than regional authorities. Mr Golletz says this will help to get lines built. But he warns it will not address the underlying cause of slow progress on a slew of projects related to renewable energy – lack of public acceptance.

In the village of Atdorf in southernmost Germany, some locals are trying to stop construction of a hydropower electricity storage plant because of the scars they fear it will leave.

Schluchseewerk, owned by RWE and EnBW, is planning a sixth hydropower pump storage station on the precipitous drop into the Rhine basin. On wind-still days, water from a huge upper basin would hurtle via a turbine buried in the hillside into a lower basin, converting potential energy into electricity.

Dietmar Oehler, a retired engineer, stands near the proposed site of the dam for the lower basin, a 70m-high wall that would loom over the touchlines of the football club in the village of Brennet. “It will be a short-term storage facility, giving a few hours of electricity. But we need long-term storage” of the type that provides electricity for weeks, he says. “Are we ready to destroy so much to reap such a little gain?”

Mr Oehler is one of 450 members of a local protest group that has collected 5,000 signatures against the project. The power company has invited opponents to join it on a round table to discuss the project. As a result, it has pushed filing for planning permission into the first months of next year. But it still says the project is vital.

“Pump storage is just a part of the answer to the entire storage question,” says Stefan Vogt, Schluchseewerk’s man in charge at Atdorf. “We’d have to build another 25 Atdorfs to cover Germany’s storage needs. We just wouldn’t be able to find enough sites or enough space. But before we find new answers to the storage problem, we have to build every storage facility we can actually realise.”

Although the government recently announced €200m in grants for electricity storage research projects, Mr Vogt believes it will eventually need some kind of comprehensive storage concept. Chastened by the debate about Atdorf, he warns that even such a project would prove very difficult if the public cannot be won over.

Mr Vogt says he is sceptical about the timing of the renewables phase-in. “The public accepts projects only when it can see the sense in them,” he says at the company’s shoebox-like offices in Laufenburg, a few miles up the Rhine. “We need politics to help us with that. We need to tell people the switch to renewables will not come without costs.”

For Ms Merkel, it seems, only once legislation has passed will the hard work begin.

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