In order for Germany’s Energiewende or ‘energy change’ to be successful, attention needs to shift towards building investor confidence, says Dr Werner Gotz, technical director of EnBW Kraftwerke AG.
Speaking at this week’s VGB Congress in Mannheim, he said it was right that the Energiewende should be seen as an opportunity, but the necessary economics to support it were not there at the moment.
Citing Baden-Württemberg as an example, Gotz says that several gas-fired combined-cycle (GTCC) power plants are “currently at risk of becoming unprofitable” because they primarily operate on standby to provide backup for Germany’s expanding renewable energy base, and are therefore “not making money”.
He added that EnBW would like to build new CCGT plants, but the current situation, resulting in a poor spark spread, did not make economic sense.
Gotz also expressed concern that without being able to attract investment in renewables, high-efficiency, flexible fossil fuel plants and the grid, parts of Germany, in particular the south of the country could face a significant security of supply risk within this decade.
He also called for the regulator to intervene in the carbon market to boost the price, which currently is labouring well below EUR10/tonne of CO2, saying this would also help to “trigger investment” in new infrastructure.
The investment challenge facing power producers in Germany and the wider European community was echoed by Johannes Lambertz, CEO of RWE AG, who said the current financial limitations mean that he expects RWE’s annual investment in power infrastructure to fall from EUR4-5bn to EUR2bn.
Roman Waleczek of Morgan Stanley, Citigroup, also painted a gloomy picture of the investment environment in Europe’s power sector. As an example, he said that Germany’s transition to a renewable energy-based electric power sector alone would cost in the region of EUR200-300bn.
However, he said that the current lack of financial liquidity was not down to a lack of interest from infrastructure investors. Rather, it was because of the perceived financial risk, which investors see as too high at the moment.
When asked whether the introduction of a capacity market mechanism would help boost investor confidence, Waleczek said it probably would but a much broader, more comprehensive political and regulatory response was required.
While Eurelectric’s secretary-general, Hans ten Berge, was less diplomatic, saying a capacity market mechanism would be no more than a “plaster” rather than a solution to encourage investment in Europe’s power infrastructure.
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