Pressure mounts on German government over energy shift

Thu Jan 19, 2012 11:33am EST

* Uncertainty hampers investment in grids, power plants

* Consistent legislation is needed to integrate renewables

By Vera Eckert and Christoph Steitz

BERLIN, Jan 19 (Reuters) - Having signalled that Germany is getting out of nuclear, the government needs to map out further steps to make the switch work, energy executives said on Thursday.

"The energy shift is a political decision without a technical concept behind it," said Stephan Reimelt, chief executive of GE Energy Germany. "I am very worried about time running out."

Germany last summer launched legislation to speed up its exit from nuclear and to 'green' its energy industry.

Once all 17 nuclear plants are switched off by 2022, a key challenge lies in how to replace the lost supply of inexpensive round-the-clock electricity with renewable power, which is unpredictable in its nature.

Economy Minister Philipp Roesler, who joined energy executives at the Handelsblatt Energiewirtschaft annual conference in Berlin this week, said the energy shift was a task to be shared by government and industry.

"But when there's a plan, it is not the job of the government to start building, it is the job of the free economy," Roesler said.

Yet industry leaders say there needs to be more incentive to invest in flexible gas-fired power plants for supply when weather is unfavourable for wind or solar or for when industry and consumers need peaktime power, for example.

INVESTMENT CASE

Germany's decision to move away from atomic power followed last March's disaster at Japan's Fukushima nuclear plant. It undermined utility earnings, annoyed power suppliers in neighbouring countries and left investors uncertain about the future.

Industry concerns include run-away subsidies in new niches like solar power, failing traditional utility business models and a perceived rift between the environment and economy ministers over who runs the show.

"Nobody knows what the future energy mix is meant to look like in detail," said Serge Colle, managing director energy and utilities at consultancy Accenture's German unit.

"It is the policymakers' task to define concrete targets and create the conditions so that investments, especially in baseload supply, add up."

Danish utility Dong last year bought a site for a possible gas plant in Ludwigsau, Germany, but CEO Anders Eldrup said this would only happen if there was "a clear and convincing business case".

One solution would be capacity payments which would guarantee operators earnings for providing back-up power in standby mode, Eldrup said.

Priority must also be given to the revamp of the network infrastructure to carry green power to consumers.

RWE Chief Executive Juergen Grossmann said more money was needed in high voltage power lines across the region where progress has lagged due to unclear legislation and citizens' opposition.

Many energy executives are angry that billions of euros are being poured into subsidising renewables to create a decentralised power generation structure instead of funding the infrastructure.

Claus Sauter, chief executive of German biofuel company Verbio, suggested that German state bank KfW could provide part of the investment necessary to make the energy shift work.

"The state needs to take some risk here," he said.

Yet Germany's leading utilities, RWE, E.ON, EnBW and Vattenfall Europe, should retain a big role in leading the transformation, Accenture's Colle said.

"They have critical size to organise the (new) aggregation and allocation in power supply, promote innovation and set new technological standards." he said.

"Those are three points that will be decisive for the strategy shift to succeed." ($1 = 0.7802 euros) (Additional reporting by Tom Kaeckenhoff; editing by Jason Neely)

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