Municipal utilities coping with energy transition
The mood among German municipal utilities is not good. A survey published by their association, the VKU, on Thursday found that only 41 percent of the firms are well positioned, a tremendous drop from the 60 percent level recorded in March. And 49 percent believe the situation will get worse.
Granted, there are exceptions. My colleague Paul Hockenos also reported last week about the success of Schwäbisch-Hall’s municipality, which serves some 500,000 customers nationwide (all German gas and power providers compete for all consumers) directed by Johannes van Bergen, who has understood what the energy transition entails all along (German environmental organization DUH has called him an "Energiewende pioneer"). While Enervie’s sales dropped by 3.8 percent from 2011 to 2012, van Bergen increased his firm's sales revenue by a whopping 34.1 percent from 2010 to 2011. On the other hand, the firm has yet to announce any figures at all for 2012 – and that at the end of September 2013.
The renewables community has no patience for the conventional sector's woes, as the comments at the bottom of this report on the VKU’s survey reveal. Assuming that Schwäbisch-Hall's municipal utility once again posted impressive figures in 2012, we clearly have an example of one firm that saw the necessary changes coming and one – Enervie – that didn't (see this week's report).
Furthermore, the two municipals invested in different technologies. Schwäbisch-Hall built cogeneration units, whose efficiency is around 90 percent; they create a relatively small amount of electricity but efficiently use the waste heat to provide process heat and space heating, generally in district heat networks. In contrast, Enervie built combined-cycle turbines, which only generate electricity; here, the waste heat is simply used to drive a second downstream turbine. The efficiency is closer to 60 percent.
What the energy transition needs is more cogeneration, not combined-cycle, which is basically a toy for engineers. Cogeneration systems are not only more efficient, but also less expensive – and so straightforward technologically as to be downright boring for engineers.
Nonetheless, we should take Enervie's concerns seriously as a municipal. Germany plans to go 80 percent renewable and its power supply by 2050, meaning that 20 percent will still be fossil-fired – and we will need backup capacity in the transition anyway. The focus here should be on promoting highly efficient energy consumption with lower carbon emissions – in other words, cogeneration running on natural gas instead of coal power.
The VKU, Enervie, the BDEW (which represents all water and energy providers, including the big guys), and a host of other market players are now all calling for an end to feed-in tariffs. Yet, their investments in gas-fired plants are also suffering because the price of carbon has been allowed to drop so low, so why are they calling for an end to feed-in tariffs, but not stricter emissions trading?
Most of all, the example of Schwäbisch-Hall’s municipal utility shows that it was also possible to prepare for the current changes. (Craig Morris)