After swallowing up many assets of former rival E.ON and daughter company Innogy in a reconfiguration of both the European and global energy sectors, the new RWE has pledged to become carbon neutral by 2040. Long Europe’s worst polluter and a steadfast opponent of the clean energy transition, it’s working hard to rebrand itself as a green innovator. However, as it plans to annually invest 1.5 billion euros in new wind, solar photovoltaic and storage, RWE is mainly focusing outside of its German backyard where it continues to generate the filthiest energy in the world, cynically profiting off the rapidly slowing Energiewende. Michael Buchsbaum explains the new RWE.
Turning a new leaf-ish
After so many years operating as an energy pariah, the new RWE is rebranding itself as a leader of the green energy transition. Europe’s largest emitter of carbon dioxide last year, according to European Union Emissions Trading Scheme data, it’s now also the third-largest renewable energy generator in Europe and second-largest offshore wind energy generator worldwide.
As such, the company boasts that some 60% of its greatly enlarged portfolio is “CO2-free or low in carbon” –the latter term being code for nuclear and fossil gas. Prior to the merger, RWE also claims to have decreased its carbon dioxide emissions by one-third from 2012 to 2018, representing a decline of 60 million metric tons.
Going forward, as RWE determines how and where to expand its renewables portfolio in the most effective and profitable manner, it’s also attempting to squeeze all remaining value out of its aging fleet of coal and nuclear plants. Moreover, the company is also racing to lock-in as much fossil gas infrastructure as possible, deflecting criticism by suggesting today’s investments will pave the way for tomorrow’s nebulous renewable “green gas” future.
How both today’s fossil and planned hydrogen gases fit into RWE’s announced long-term strategy is too complex of a topic to be adequately covered here and will be the subject of an upcoming blog. Nevertheless, its current investment pathway all but ensures that Germany won’t meet the goals of the 2015 Paris climate accords.
Near-term green-energy opportunities lie mainly outside Germany
Roughly a year ago in February 2019, CEO Dr. Rolf Martin Schmitz told an audience at the E-world power industry conference in Essen, RWE’s hometown, that after its merger, most of its new green investments would be made outside of Germany.
Good to his word, since then RWE has prioritized investments in offshore wind parks in northern and eastern Europe while also moving forward with onshore wind and storage in the U.S. and Australia. Its also carving out an offshore wind investment strategy for Japan and much of Asia.
As the company evaluates where it should invest, it has certainly taken into consideration the network constraints, grid congestion and rising local opposition against onshore wind development happening at home and decided to invest elsewhere. Bottom line, “you look where you earn the most money, at the moment, that is certainly not Germany,” said CEO Schmitz.
Though solar PV additions totaled an estimated 4 GW in Germany 2019, onshore wind sector expansion there has disastrously collapsed. The latest casualty in the German government’s continued mismanagement of the entire Energiewende, with much of the energy industry seeing nothing but uncertainty, Schmitz lamented that with the exception of offshore wind, “there is no space or market” in RWE’s home nation currently for new green investments.
Nevertheless, RWE’s current investment strategy provides little evidence that the company has actually embraced the exigency of addressing the growing climate crisis. “RWE appears to be transitioning, but as slowly as possible, and only when pressed by political developments,” said Katrin Ganswindt, Climate Campaigner for German climate NGO Urgewald. Company public relations efforts emphasizing their reconfiguration are simply being used to mask the company’s only grudging obedience to various government decisions to decommission coal plants, e.g. in the UK and the Netherlands.
Founded upon lignite and nukes
Not to forget, as Schmitz himself boasted, “lignite and nuclear energy have laid the foundations we are building the new RWE on.” Maximizing their value and maintaining the lifetime of those assets also remains a key strategy.
When and how those plants are actually phased out depends upon the future of the increasingly fragile Grand Coalition government between Chancellor Angela Merkel’s CDU and their partner SPD to hold to the previously determined nuclear phase out as well as the latest pro-offered coal-exit plan.
The newest plan calls for the curtailment of lignite and hard coal generation from 45 GW of capacity in 2019 to 17 GW in 2030 –heading down to zero by 2038. However doing so apparently requires the turning on of the massive 1,100 MW Datteln 4 hard-coal power plant. Though owned by Uniper, its only two customers are Deutsche Bahn and RWE.
RWE, of course, has long resisted government actions to reduce Germany’s coal reliance – from which it profits. “RWE knows that the coal commission’s 2038 phase out is roughly equal to a business as usual pathway,” wrote Ganswindt. If RWE really wants to show genuine climate leadership, “it should begin by agreeing to close down 3.1 GW of lignite – thereby ensuring that the villages of North-Rhine Westphalia…now scheduled to be destroyed for expanding mines will be spared from destruction,” said Ganswindt.
Either way, RWE will be handsomely compensated for bending to government will and closing some lignite plants early. Now set to receive initial payments of 2.6 billion euros to shut down its first plants, Schmitz wasn’t joking when he said the firm will benefit most from a federally managed phase-out. With almost 17 GW of coal capacity, “we prefer planning security to no planning at all,” he said. Investors were thrilled by the government decision and RWE’s stock rose over 3% on the news of the deal, their highest level since 2014.
Simply put, “if the renewables are not there,” warned CEO Schmitz, then “we cannot turn off the other sources.” Reading between the lines, the longer the political situation remains confused, the more RWE’s filthy lignite fleet can keep pumping out their polluting profits.