Energy Journal: German Utilities? Nein, Danke

August 15, 2013 by  
Filed under Solar Energy Tips

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In Europe, those in power are struggling. Not the governments (this time), nor the people (although with record unemployment they sure are struggling), but the utilities.

Buffeted from one side by a plethora of national targets and regulations and on the other by continent-wide emissions targets, all at a time when consumption is being dragged down by the grinding economic malaise and input costs are rising, power producers are struggling to make money.

The Wall Street Journal’s Andrew Peaple says Europe’s utility markets read like Tolstoy’s unhappy families—each is miserable in their own way. Germany is more miserable than most.

The country’s dominant giants are shrinking fast. RWE will shut around 6% of its total power-generation capacity, the Journal’s Jan Hromadko explains. Its peer E.ON has warned of the intense pressure facing its generation operation and said it too will consider shutting plants.

Their problems ape those facing Big Oil. RWE and E.ON bulked up through mergers and acquisitions before 2007. Now, caught on the hop by a dramatic switch in their key markets—Germany’s solar-power capacity is through the roof—they are proving slow to react.

The result is a loss of market share and a dramatic loss in market value. The Financial Times notes that RWE’s value has fallen by one-third in the past five years; E.ON has dropped 15% in that time. Neither offers earnings growth until 2022, according to Citi research.

Is there an answer? E.ON has threatened to physically move its power plants to other European countries that are less enthusiastic about renewable energy and more into cheap power.

With national elections due in Germany in September, this could just be political posturing. Chancellor Angela Merkel doesn’t seem like she will be moved from her energy policies, but the future of the country’s revolutionary, experimental shift to all renewables will depend on who sits in the key economy and environment ministries after the poll results are in.


Another country deciding its future next month is Australia. The Daily Show has a funny explainer of how the Australian electoral system works, while the Journal takes a more serious look at the key policies.

The climate is a hot topic in the land down under, with renewables targets and the carbon tax in full focus.

Incumbent power generators say that renewables targets will lead to an increase in bills for consumers. Bloomberg New Energy Finance spears that claim, saying while reducing the targets will, in isolation, bring down the headline costs, it will likely lead to higher wholesale prices through less competition.

On the carbon tax issue, The Journal says there is a clear choice between incumbent Kevin Rudd’s reform plans (which look a bit like the European Union’s shaky system) and the opposition’s pledge to scrap it totally. The cost of living is a key issue in Australia, and the battle lines are firmly drawn.

The tax looks doomed whatever the election result, Platts says. The country’s burgeoning liquefied natural gas industry, which is being squeezed by high labor costs and a strong Aussie dollar, doesn’t need an extra cost as it braces itself for U.S. gas exports coming to market.


Crude-oil prices fell for the first time in three sessions Wednesday after a report showed U.S. oil stocks declined by less than expected last week. Read the Journal’s latest oil-market report here.

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