Energy giants feel pain of a changing market

Germany's two largest energy generators, E.ON and RWE, are battling to stay in the black as the Energiewende (transition to green energy) has left them out in the cold.

Energy giants feel pain of a changing market
E.ON power plant at Grohnde. Photo: DPA

On Tuesday E.ON announced the biggest loses recorded by a publicly-traded energy provider in the history of the German Republic.

The company said in a statement that "the persistently difficult situation on energy markets" and a drastic reorganisation pushed it deeply into the red in 2014.

It recorded a bottom-line loss of €3.16 billion for 2014, compared with a profit of €2.09 billion for 2013.

Christoph Podewils, Head of Communications at Agora Energiewende, a think tank which focuses on Germany's transition to renewable energy, told The Local that the reasons for E.ON's financial troubles are twofold.

“There is decreasing demand for energy throughout Europe because of the economic crisis. And there is also increased supply because renewable energy sources have come onto the market at close to zero cost,” said Podewils.

Prices on the power market have been going down since 2010, he says, meaning once profitable power stations now have to sell off electricity at marginal prices.

Minnows undercut whales

Adding to the big energy concerns woes is greater competition.

“Wehereas before there were 6 big energy companies competing for a market, today they are in competition with millions of small producers,” said Podewils, referring to small wind and solar projects that dot the German countryside.

The warning signs that difficult times lay ahead were there late in 2014, when the company announced that it would be splitting its operations into two companies, one which focused on renewable energy and one which took care of its traditional coal and gas concerns.

"Considering the continued difficult market environment in many countries, we're generally satisfied with our 2014 results, particularly since we achieved lasting cost reductions across our business and made a number of successful disposals," chief financial officer Klaus Schäfer said.

Schäfer blamed the losses on low oil prices, adverse currency rates and a decline in power prices.

Witschaftswoche reports that the company is expecting further losses in the current year.

The financial magazine writes that the news is barely better for one of Germany's other energy giants RWE which recorded a profit in 2014 only because it had undertaken costly write-offs in the previous financial year.

RWE boss Peter Terium warned that the situation this year was likely to be worse than in the previous year, since 35-40 percent of conventional power stations were no longer profitable.

Podewils told The Local that there is still a future for some traditional energy sources.

“The nuclear phase-out [the German government's decision to shut down all nuclear power sources by 2022] will influence demand.

"Also in the long run we will need highly flexible gas power plants to compensate for when there is a lack of wind or sun,” he said.

French energy company lays off German workers

In more bad news for those involved in Germany's energy industry, the French nuclear energy company Areva announced on Wednesday that it is seeking to cut around 1,500 job in Germany by the end of 2017.

At a meeting between management and employees on Tuesday, Areva's chief Philippe Knoche said the company planned to slash 1,500 full-time-equivalent jobs by the end of 2017 including 500 to be carried out this year, the spokesman said.

Wolfgang Niclas, representative for the IG Metall union, said earlier that 1,000 jobs were on the line in 2016 and 2017, confirming a report in the French business daily Les Echos.

Areva employs more than 5,000 people across eight sites in Germany, according to the group's website.

Last week the French nuclear group confirmed record net losses in 2014 of 4.8 billion euros ($5.3 billion) after it was forced to absorb costs linked to delays to its flagship next-generation reactor.

With AFP


Member comments

Log in here to leave a comment.
Become a Member to leave a comment.


‘No longer pushing the burden into future’: German govt approves more ambitious climate targets

The German government on Wednesday approved a new law setting more ambitious targets to reduce CO2 emissions, after the country's top court declared a flagship climate law "insufficient".

'No longer pushing the burden into future': German govt approves more ambitious climate targets
German environment minister Svenja Schulze holding up the country's new emissions targets at a press conference on Wednesday. Photo: picture alliance/dpa | Kay Nietfeld

“We are setting the framework for the next years and decades,” said Environment Minister Svenja Schulze, adding that the reform was a “fair offer to the younger generations” as it “no longer pushes the burden into the future”.

In a sensational ruling last month, Germany’s Constitutional Court said the current climate protection law threatened to “irreversibly offload major emission reduction burdens” onto the period after 2030, thereby “violating the freedoms” of future generations.

READ ALSO: ‘Exclamation mark for climate protection’: How Germany is reacting to top court’s landmark ruling

Already under electoral pressure from the Green Party, which currently leads opinion polls ahead of September’s general election, the ruling left-right coalition has since moved quickly to tighten the law.

Under the new targets approved by Chancellor Angela Merkel’s cabinet on Wednesday, the government expects to slash emissions by 65 percent by 2030 compared to 1990 levels, going further than the current 55 percent reduction target

The cut will reach 88 percent by 2040, with the goal of bringing Germany to carbon neutrality by 2045, five years earlier than previously expected. Schulze added that Germany would also now aim to record negative emissions from 2050 onwards, by absorbing more greenhouse gases than it produced.

“We are talking about nothing less than a doubling of the tempo when it comes to climate protection,” she said.

“That is a huge task, but I am optimistic,” she said, adding that the government planned to see the law through parliament before September’s elections.

Yet critics argued that even the more stringent targets did not go far enough.

Speaking to public broadcaster ARD, Green Party leader and would-be Merkel successor Annalena Baerbock urged the government to “not just name targets, but also measures with which we can reach these targets”.

In a stunt in the early hours of Wednesday morning, Greenpeace Germany projected an image onto the wall of Merkel’s office which showed the words “right to a future, climate protection now!” against a background of flames.

The group has called for further measures such as an exit from coal by 2030 and a ban on combustion engines from 2025.

Germany currently aims to phase out coal power by 2038 at the latest, though Schulze claimed Wednesday that this date could be brought forward with a sufficient expansion of renewable energies.