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Utility RWE plans to offset all of its carbon emissions by 2040

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RWE's Niederaussem power station in Germany, one of the largest coal plants in Europe at 3,864 MW.
Source: RWE AG


German utility RWE AG is aiming to become carbon neutral by 2040, taking advantage of government-mandated coal phaseouts in Europe and a recently completed asset swap that significantly greens the company's power plant portfolio.

RWE said Sept. 30 that it will gradually reduce all of its CO2 emissions over the next 20 years by closing its coal plants or switching them to biomass, betting on energy storage to complement a growing renewables portfolio and using electricity to produce hydrogen and burn it in many of its remaining power plants.

"We are consistently and responsibly quitting fossil energy," CEO Rolf Martin Schmitz said during a press conference in Essen, Germany. With the 2040 goal, RWE would be "far exceeding" current national and international climate targets as well as plans by competitors, Schmitz said.

The utility, one of the largest emitters in Europe, generates much of its power from a fleet of hard coal and lignite power plants, mostly concentrated in Germany. By RWE's own estimate, it is also the fourth-largest gas generator on the continent.

But RWE received final approval this month for a vast asset swap with rival E.ON SE that will make RWE one of the biggest renewable players in the world and give the company a head start in reducing emissions, Schmitz said. The utility also expects to roughly double its EBITDA as a result of the deal, aiming for core earnings of just over €3 billion in 2020, RWE CFO Markus Krebber said.

Schmitz said RWE already decreased its CO2 emissions by 60 million tonnes, or one-third, between 2012 to 2018 and is targeting an approximately 70% reduction by 2030.

The company will decommission its last coal plant in the U.K., where the government set a deadline of 2025 for phasing out unabated coal power, and will have to shutter all of its German plants by 2038 under a plan now being drafted into law. In the Netherlands, where the state wants to phase out coal by 2030, RWE is refitting its two coal-fired power stations to burn biomass instead.

"For the time after that, in addition to a large, international portfolio of wind and solar plants, we are betting on storage, biomass and gas-fired power plants largely run with green gas," Schmitz said.

A spokesperson said the biomass the company will buy will be CO2 neutral. RWE also plans to offset any remaining emissions, for example from gas plants, by using other "carbon reduction" methods, which could include buying certificates.

RWE is meeting with officials in Germany's economic and energy ministry to find a consensus on how lignite-fired plants should be shut down and compensated under the country's phaseout. The company has said it will press to receive about €1.5 billion per GW of closures, taking into account the associated shutdowns of its open-surface lignite mines.

While the government is seeking to sign bilateral agreements with lignite operators, hard coal plants are to be closed using reverse auctions, with owners bidding to close their plants on price.

The ministry said in July that it was in "advanced" talks with RWE over the lignite closures, but when asked about their progress, Schmitz offered only thinly veiled criticism of the speed of negotiations, which he said have not moved past a schedule yet.

"We have been ready for a long time," he said.