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A new Energy Policy for the new EU Commission
Matthias DürrHead of the Brussels Representation, RWE AG
17th December 2014
RWE AG – CEA-P SEITE 2
Nur für den internen Gebrauch
Agenda
A new Energy Policy for the new EU Commission
1. The RWE Group: Europe is our market
2. Choices to be faced for future Climate and Energy Policy
3. The EU 2030 framework
4. The reality of the energy market
5. The way forward
Conventional PowerGeneration
RWE Generation
Supply/DistributionNetworksGermany
RWE Deutschland
SupplyNetherlands/Belgium
Essent
SupplyUnited Kingdom
RWE npower
Central Easternand SouthEastern Europe
RWE East
Renewables
RWE Innogy
UpstreamGas & Oil
RWE Dea
Trading /GasMidstream
RWE Supply & Trading
As of 31 December 2013.
Europe is our market
RWE Group structure
We generate about € 54 billion in revenue.
We employ 66,000 employees.
We produce about 3 billion cubic metres of gas and
We generate about 217 billion kilowatt-hours of electricity.
We sell 271 billion kilowatt-hours of electricity and 335 billion kilowatt-hours of gas.
We supply nearly 16 million electricity and about 7 million gas customers.
We have about 370,000 shareholders.
PAGE 5RWE AG CEA - Weale
Choices to be faced for future Climate and Energy Policy
1. How many goals and instruments to apply:
– Role of renewables / efficiency targets vs. CO2 goals needs careful justification
2. How to support renewables:
– whether the capacity (MW) or the output (MWh)
3. How much “economics” can be maintained in policy decisions:
– Should price of power reflect long-run costs and play optimal role in decarbonisation
– Is more cost-reflective consumer pricing structure better for a market-based approach? Should the fixed part of price reflect all fixed costs along supply chain?
RWE AG
PAGE 6RWE AG CEA - Weale
Choices to be faced for future Climate and Energy Policy
4. How much can be expected from the Energy Only Market?
– Role is to achieve efficient dispatching of plants - without acceptance of scarcity pricing it may not adequately incentivise investment in renewables or ensure supply security
– Therefore a capacity mechanism may be required (already under consideration)
5. How curtailing any one source of power (e.g. nuclear, lignite) will affect:
– Dispatching of other national sources and imports
– Prices, supply security, and emissions
6. How much will national goals achieve in the context of European / International targets and how will national policy decisions impact on other Member States and EU Policies?
RWE AG
RWE AG – CEA-P SEITE 7
Nur für den internen Gebrauch
Greenhouse gas emissions
Renewable energy
Energy efficiency
until 2020
-20 %
reference year 1990
20 %of energy consumption
20 %absolute reduction compared to business as usual
until 2030
-40 %
reference year 1990
27 %
of energy consumption
27 % absolute reduction in compared to business as usual
Inter-connectivity
10 %
15 %from national capacity
New targets: from 20/20/20 (+10) to 40/27/27 (+15)
Decisions taken by the European Council
- Only CO2 reduction target will be translated into national binding targets
- Renewables and efficiency targets are EU level targets
- Energy efficiency target is only indicative
- New governance structure to coordinate EU and national policies transparency, predictability, regional cooperation
+
RWE AG – CEA-P SEITE 8
Nur für den internen Gebrauch
EU 2030 framework
Assessment from RWE’s perspective E
U20
30
ove
rall
• Despite the economic crisis, EU sticks to its climate-protection agenda
• 40% CO2 emissions reduction target: ambitious but feasible when fair burden sharing between Member States
• ETS will be strengthened through higher linear reduction factor and MSR
• stable and higher CO2 prices and increased trust in the system
ET
S
• Need for back-up capacity is recognised – a first step towards a European approach for capacity mechanismsC
RM
• Abstention from binding renewable targets at national level: positive signal for more market and more flexibility
ren
ew
ab
les
• Non-binding target allows a market-based approach and gives room for better framework conditions
en
erg
y
eff
icie
nc
y
SEITE 9CEA-P
The reality of the energy market
Generation business under pressure – not only in Germany
1) Rough profitability analysis for 2013 to 2015 in % of installed capacity of RWE’s conventional generation portfolio (economic stake) in Germany, United Kingdom and the Netherlands (in total ca. 44 gigawatts) based on market parameters as of January 2013
Revenues of the conventional power plants of RWE1)
For 20-30% of the plants, electricity revenues don’t even cover the O&M costs
O&M costs Depreciation Capital costs
For 5-15% of the plants, electricity revenues only cover the O&M costs as well as parts of the depreciations
For 5-15% of the plants, electricity revenues cover the costs of operation and maintenance (O&M) as well as depreciations, but not the capital costs
For 50-60% of the plants, electricity revenues cover all costs (incl. capital costs)
PAGE 10
The principle: one goal - one instrument
Non-discriminatory system to reward availability of firm power generation capacity
Market integration of renewable energy
Goal: Security of supply Goal: Affordable electricity
A reformed ETS with a long-term target to reduce CO2 emissions
Goal: Climate protection
The way forward
A new policy framework and a new energy market design
SEITE 11CEA-P
A market for firm capacity may supplement the energy only market – kind of an airbag or insurance
€/Megawatt hour
Generation Trading Transport Sales ConsumerEEG
€/Megawatt hour
€/Megawatt firm capacity
Supplement the energy-only-market by a market for firm capacity. Retailers (decentralized) or grid operators (centralized) define, how much firm capacity is reguired. They buy required firm capacity from power plant operators. Power plant operators must deliver, once the market gets tight.
new
RWE Generation SE | Dr. Ulrich Hartmann SEITE 12
Our way into the future…
„Smart Country“
„Smart Operator“
Thank you very much for your attention!