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RWE renewables focus will lie outside Germany after asset swap, CEO says


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RWE renewables focus will lie outside Germany after asset swap, CEO says

The newly formed RWE AG will mainly invest the billions it plans to spend annually on renewables outside of its home market of Germany after its asset swap with rival E.ON SE and subsidiary Innogy SE is completed later this year, the company's chief executive said.

"You look where you earn the most money. At the moment, that is certainly not Germany," Rolf Martin Schmitz, who has led the company since 2016, told an audience at the E-world power industry conference in Essen, Germany, on Feb. 4. He said the company will continue to invest globally.

Under a €40 billion asset swap announced last year, RWE is set to become the third-largest renewable energy generator in Europe and second-largest player in the offshore wind sector by taking over all the renewables assets of E.ON and Innogy. In its new incarnation, the company plans to spend €1.5 billion per year to grow its portfolio by between 2 GW and 3 GW of new wind and solar photovoltaic, or PV, capacity.

But Germany, where RWE operates the largest fleet of coal-fired power plants, won't receive a majority of the planned investments, according to Schmitz. "There is just no space or market for it," he said.

Although solar PV additions totaled approximately 3 GW in Germany last year, the onshore wind sector has collapsed around the introduction of competitive auctions and a slowdown in approvals. The most recent tender in October 2018 saw prices tick up as interest from developers waned, although the government has also introduced special auctions for 8 GW of extra renewables capacity to be tendered between 2019 and 2021.

Power network constraints and rising local opposition will likely keep a lid on onshore wind development for the foreseeable future, Thorsten Herdan, an official in the German energy ministry, said at the event in Essen. "This issue will not be wiped off the table overnight," he said.

Grid congestion between the wind power-producing north and electricity-hungry south of the country is additionally seen as putting the brakes on Germany's buildout of offshore wind, a sector in which both E.ON and Innogy are active. Herdan said that smarter grid management could enable a maximum of 17 GW of offshore capacity by 2030, up from roughly 6.5 GW now and against the current government target of 15 GW by then.

Germany's four transmission grid operators released a draft development plan on Feb. 4 that projects up to €24 billion in extra network upgrades could be needed if offshore wind is to play an increased role in reaching Germany's target of producing 65% of its electricity from renewables by 2030.

As part of its renewables target, the country is also planning to shut down a large part of its lignite and hard coal power plants over the next decade. A commission set up by the government recommended last month that coal capacity be cut from around 45 GW now to 17 GW by 2030, and shut down completely by 2038 at the latest. The ruling coalition is now probing the proposal and plans to introduce a law to manage a coal phaseout based on the recommendations later this year.

RWE expects to be handsomely compensated for closing its plants early, and Schmitz said the firm will more broadly benefit from the planning security a managed phaseout offers.

"We prefer planning security to no planning at all," he said, cautioning that a lukewarm renewables buildout will be the death knell for the commission's plans. "If the renewables are not there, I cannot turn off the other sources," he said.

Schmitz also warned that bilateral discussions between the government and coal operators, which also include Energeticky a Prumyslovy Holding a.s., EnBW Energie Baden-Württemberg AG, STEAG GmbH and Uniper SE, would have to start very soon if the timetable of closing the first power stations in the early 2020s is to be kept.