January 18, 2012
Germany

German shift from nuclear a Herculean task -execs

By Christoph Steitz and Vera Eckert, Reuters, www.reuters.com 18 January 2012

Progress in Germany’s energy shift away from nuclear power is painfully slow, hampered by what energy sector executives say are inadequate incentives and a lack of strong investors, suggesting it will be Herculean task.

Germany, prompted by the March 11 earthquake and tsunami last year that caused a disaster at Japan’s Fukushima plant, decided to abandon nuclear power by 2022, leaving a large energy gap to fill.

Almost a year on, not much has happened to develop alternatives, executives of Germany’s energy industry complained at this year’s Handelsblatt Energiewirtschaft conference in Berlin, the agenda-setting meeting at the start of each year.

“Since the energy shift was announced, not much has happened,” said Michael Suess, a board member at German industry conglomerate Siemens who is in charge of the group’s energy sector.

Switching off all 17 nuclear plants by 2022 will lead to a power gap of more 20,000 megawatts (MW) and the German government is focusing its plans on new gas plants, as they are friendlier to the environment than coal plants.

Utilities, are less keen. They say high natural gas costs, still mostly tied to oil with its inbuilt geopolitical price premiums, and low power prices make gas plants an unprofitable business.

“The goals is very ambitious – this will not be easy,” said Juergen Grossmann, chief executive of Germany’s No.2 utility RWE .

One of the top priorities is the expansion of transport and distribution networks for power from renewables sources including wind and solar, Germany’s new favoured form of energy.

The task is being delayed by protests and overly long procedures to approve new grids and existing grid revamps, which in some cases take more than 10 years.

New power networks are necessary to transport power from renewable sources, notably wind energy, to the south of Germany from wind turbines in the north, which will be increasingly placed in the windy high seas offshore Germany.

German energy agency DENA estimates 3,700 km of networks to transport maximum voltage need to be built by 2025. In the past few years, however, only 100 km have materialised.

Siemens estimates that Germany’s energy shift will cost up to 1.7 trillion euros ($2.17 trillion) by 2030, most of which will be borne by taxpayers and power consumers.

Germany’s roughly 900 municipal utilities, seeing a chance to gain more control over future markets, aim to invest billions of euros in new power plants and more than double their share in power production to 25 percent over the next 10-15 years.

The top ten public utilities have said 10 billion euros in investments would be possible over the next 10 years.

However, executives agreed a more favourable investment climate was needed to make the envisaged shift become reality.

“The energy sector in Europe must attract private investments and not just through subsidies,” said Gerard Mestrallet, chief executive of French utility GDF Suez.

Renewable power – still heavily subsidised to be competitive against conventional energy sources – is to account for at least 35 percent of Germany’s total electricity mix, up from 20 percent now, according to government targets.

With 7.6 percent, wind power accounts for the greatest share of renewables in Germany’s energy mix, and according to industry body BDEW capacity stood at 27,000 MW by mid-2011.

But only a fraction of this is offshore. Only 54 turbines with a total capacity of 210 MW are so far located off Germany’s coasts.

This suggests Germany’s goal of installing about 7,600 MW in offshore capacity by 2020 and 25,000 MW by 2030 seems overly ambitious. Germany’s Environment Ministry said that to hit the 2030 target, up to 1,500 MW must be installed per year, or one turbine per year during Germany’s “fair weather season” that accounts for about half of the year.

Solar power accounted for only 3.2 percent of Germany’s energy mix in 2011, while swallowing up 8 billion euros, almost half of all renewable energy costs borne by the country’s consumers. The government wants to increase that share to 10 percent by 2020.

“Photovoltaic (energy) in Germany makes as much sense as growing pineapples in Alaska,” RWE’s Grossmann said, referring to Germany’s limited sunshine. ($1 = 0.7851 euros) (Additional reporting by Tom Kaeckenhoff, Anneli Palmen and Markus Wacket; Editing by Anthony Barker)