06 Tuesday E.ON Malte Knizia
The challenges E.ON faces in the European utility business and strategies for the future 2014 SEPA Executive Fact Finding Mission / Exploring the Energy Transition in Germany Malte Knizia, E.ON SE / E.ON Deutschland VP Market Analysis, Energy Economics and Project Development Düsseldorf, September 16th, 2014
Challenging market trends are rather complex and diverse
“Energiewende” affects businesses
The „Energiewende“ Nuclear phase out Substantial retail price hikes due to increases in levies subsidizing among others renewables Integration of decentralized generation into the energy system Flexibility requirements and electricity storage
Pressure on conventional generation Investments into renewable generation capacity Mitigating the risk of exposure to German regulation
2
Energy concept 2050: Facts & figures about Energiewende
3
2011
2020
2050
Greenhouse Gas Emissions (against 1990)
- 24%
- 40%
> - 80%
Primary energy use (against 2008)
- 6%
- 20%
- 50%
Electricity demand (against 2008)
- 2,1%
- 10%
- 25%
Share of Renewable Energy in electricity consumption
20%
≥ 35%
≥ 80%
Electro mobility (No. of cars)
6.000
1 Mio.
-
The impact on the energy mix in Germany is significant Elec. power generation 2012
Elec. power generation 2030
Renewable / distributed energy
73%
27%
6%
31%
Hydro
21%
Wind onshore
23%
Wind offshore
14%
PV
13%
Biomass power
69%
CHP
Conventional energy Hard coal Lignite Natural gas Nuclear power
4
What is the impact on the energy system in Germany?
22% 2%
Geothermal energy
Nuclear phase out
E.ON has been and is the largest operator of nuclear power plants in Germany De-commissionings in the wake of Fukushima affected the E.ON portfolio massively (Brunsbüttel, Krümmel, Unterweser, Isar 1) Next units to be de-commissioned Grafenrheinfeld in the coming months Other units (Grohnde, Gundremmingen B and C, Isar 2, Emsland) to follow until 2022
5
E.ON well prepared - Ample experience in dismantling of nuclear power plants - Units Stade and Würgassen already almost back to green field - Licensing for dismantling of recently decommissioned units has been started
Substantial retail price hikes due to increases in levies subsidizing among others renewables
Increase in churn rate - Frequent price hikes increase churn rates - Churn rates hit incumbents most - But: net customer gain in first half of 2014: 32.000
High electricity prices accelerate on-site production - Increasing business with decentralized CHP generation - 97 new decentral units until August Autoproduction based on PV becoming attractive without subsidies - E.ON offering PV systems to customers
6
Integration of decentralised generation into the system
July 2013 * Source: E.ON Netz Surveys ** Source: Scenario C NEP 2012
Major challenge for all regions integrating RES-capacity to be installed Best way to cope with the challenge depends on the dominant kind of RES installed in a region Distribution grids designed for distribution collect electricity instead 7
Flexibility reqirements and electrical storage Common wisdom: Fluctuating renewable feed-in will require additional electrical storage E.ON well prepared: - Operator of pumped storage facilities - Licensed pumped storage project ready to be built - Contracted pumped storage capacity in the Alps - Operator of one of the two compressed air storage facilities in the world - Pioneering advanced storage opportunities like power-to-gas or large batteries
But: - Currently enough flexibility in the North Western European system to cope with fluctuation from renewables - Spreads between peak and off-peak decreasing due to peak shaving by solar PV putting storage installations under pressure
8
Pressure on conventional generation EEX Forwards
5.00 0.00 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 €/MWh
-5.00 -10.00 -15.00 -20.00 -25.00 Clean Spark Spread
9
Spark Spread
New conventional units, fast growing renewables and more or less constant consumption lead to low wholesale prices CCGTs pushed out of the market Margins for other conventional generators extremely low Wave of decommissionings for power stations Generation adequacy not an issue in the short to medium term But: - Security of supply issues in Southern Germany due to limited transport capacities from North East to South West - Several units of E.ON in Southern Germany contracted by TSO to ensure grid stability
Investment into renewable generation capacity E.ON largest German investor in renewables E.ON active in a wide variety of renewable activities Hydro (Sweden, Germany, Turkey, Italy) Solar PV and CSP predominantly in Southern Europe Wind onshore and offshore Biomass e.g. biomethane production Pioneer of offshore wind in general and in Germany in particular Co-investor at first offshore wind farm Nysted First private offshore wind met mast in Germany Partner in first German offshore wind farm alpha ventus Co-investor in largest offshore wind farm of the world Currently constructing of the large German offshore wind farm Amrumbank West 10
Mitigation of risk exposure to German regulation E.ON has expanded its footprint into other European countries and outside Europe - UK and Sweden - Central Europe East (e. g. Czech Republic, Hungary) - United States - Russia - Brazil and Turkey In Turkey we have more clients than in our home market In Russia we are producing more electricity based on fossil fuels than in Germany Our main activities in onshore wind are in the States Only this year total offshore capacity in Germany is surpassing our respective portfolio in the UK
11
Challenging market trends are rather complex and diverse
“Energiewende” affects businesses
The „Energiewende“ Nuclear phase out Substantial retail price hikes due to increases in levies subsidizing among others renewables Integration of decentralized generation into the energy system Flexibility requirements and electricity storage
Pressure on conventional generation Investments into renewable generation capacity Mitigating the risk of exposure to German regulation
2
Energy concept 2050: Facts & figures about Energiewende
3
2011
2020
2050
Greenhouse Gas Emissions (against 1990)
- 24%
- 40%
> - 80%
Primary energy use (against 2008)
- 6%
- 20%
- 50%
Electricity demand (against 2008)
- 2,1%
- 10%
- 25%
Share of Renewable Energy in electricity consumption
20%
≥ 35%
≥ 80%
Electro mobility (No. of cars)
6.000
1 Mio.
-
The impact on the energy mix in Germany is significant Elec. power generation 2012
Elec. power generation 2030
Renewable / distributed energy
73%
27%
6%
31%
Hydro
21%
Wind onshore
23%
Wind offshore
14%
PV
13%
Biomass power
69%
CHP
Conventional energy Hard coal Lignite Natural gas Nuclear power
4
What is the impact on the energy system in Germany?
22% 2%
Geothermal energy
Nuclear phase out
E.ON has been and is the largest operator of nuclear power plants in Germany De-commissionings in the wake of Fukushima affected the E.ON portfolio massively (Brunsbüttel, Krümmel, Unterweser, Isar 1) Next units to be de-commissioned Grafenrheinfeld in the coming months Other units (Grohnde, Gundremmingen B and C, Isar 2, Emsland) to follow until 2022
5
E.ON well prepared - Ample experience in dismantling of nuclear power plants - Units Stade and Würgassen already almost back to green field - Licensing for dismantling of recently decommissioned units has been started
Substantial retail price hikes due to increases in levies subsidizing among others renewables
Increase in churn rate - Frequent price hikes increase churn rates - Churn rates hit incumbents most - But: net customer gain in first half of 2014: 32.000
High electricity prices accelerate on-site production - Increasing business with decentralized CHP generation - 97 new decentral units until August Autoproduction based on PV becoming attractive without subsidies - E.ON offering PV systems to customers
6
Integration of decentralised generation into the system
July 2013 * Source: E.ON Netz Surveys ** Source: Scenario C NEP 2012
Major challenge for all regions integrating RES-capacity to be installed Best way to cope with the challenge depends on the dominant kind of RES installed in a region Distribution grids designed for distribution collect electricity instead 7
Flexibility reqirements and electrical storage Common wisdom: Fluctuating renewable feed-in will require additional electrical storage E.ON well prepared: - Operator of pumped storage facilities - Licensed pumped storage project ready to be built - Contracted pumped storage capacity in the Alps - Operator of one of the two compressed air storage facilities in the world - Pioneering advanced storage opportunities like power-to-gas or large batteries
But: - Currently enough flexibility in the North Western European system to cope with fluctuation from renewables - Spreads between peak and off-peak decreasing due to peak shaving by solar PV putting storage installations under pressure
8
Pressure on conventional generation EEX Forwards
5.00 0.00 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 €/MWh
-5.00 -10.00 -15.00 -20.00 -25.00 Clean Spark Spread
9
Spark Spread
New conventional units, fast growing renewables and more or less constant consumption lead to low wholesale prices CCGTs pushed out of the market Margins for other conventional generators extremely low Wave of decommissionings for power stations Generation adequacy not an issue in the short to medium term But: - Security of supply issues in Southern Germany due to limited transport capacities from North East to South West - Several units of E.ON in Southern Germany contracted by TSO to ensure grid stability
Investment into renewable generation capacity E.ON largest German investor in renewables E.ON active in a wide variety of renewable activities Hydro (Sweden, Germany, Turkey, Italy) Solar PV and CSP predominantly in Southern Europe Wind onshore and offshore Biomass e.g. biomethane production Pioneer of offshore wind in general and in Germany in particular Co-investor at first offshore wind farm Nysted First private offshore wind met mast in Germany Partner in first German offshore wind farm alpha ventus Co-investor in largest offshore wind farm of the world Currently constructing of the large German offshore wind farm Amrumbank West 10
Mitigation of risk exposure to German regulation E.ON has expanded its footprint into other European countries and outside Europe - UK and Sweden - Central Europe East (e. g. Czech Republic, Hungary) - United States - Russia - Brazil and Turkey In Turkey we have more clients than in our home market In Russia we are producing more electricity based on fossil fuels than in Germany Our main activities in onshore wind are in the States Only this year total offshore capacity in Germany is surpassing our respective portfolio in the UK
11
