Bloomberg News

GE Backs German Renewables Subsidy Cuts in Slow Gas Market (1)

January 20, 2014

General Electric Co. (GE:US) favors reforms to Germany’s energy policy as proposed by new Energy Minister Sigmar Gabriel, saying the reduced renewable energy subsidies will make the market more efficient.

Germany needs to focus energy spending on research and development rather than subsidies, Stephan Reimelt, GE’s head of energy in Germany, said in a telephone interview today. The company today sealed a 100 million-euro ($136 million) contract from Vattenfall SE to supply a gas turbine to a plant in Berlin.

“The direct market requirements for renewable energy is very important, and that is something that we see spelled out very clearly and that we support,” Reimelt said. “Germany should focus on innovation rather than subsidies and building. There is 230 million euros of R&D budget for this space and 20 billion euros of subsidies for renewables.”

Gabriel is proposing to reduce aid for onshore wind units by as much as 20 percent in 2015 from 2013 levels as Chancellor Angela Merkel’s third-term government intends to cut the cost of her plan to shutter Germany’s nuclear plants and move Europe’s biggest economy toward renewables. She said one of her top priorities is to modernize the system of clean-energy aid after rising wind and solar costs sent consumer power bills soaring.

Not Competitive

“The more renewables you bring into the grid, you have to take the fossil power out of the grid,” Reimelt said. “And so the projects and the operating power in gas turbines are heavily decreasing and being reduced to situations where most of these projects are not competitive any more. If you plan a project based on 8,000 operating hours rather than 1,000, you can imagine there is a fundamental difference.”

General Electric lagged only Vestas Wind Systems A/S in global wind power market share in 2012, according to data compiled by Bloomberg.

Gabriel intends to limit subsidies paid to developers of land-based wind turbines to no more than 9 euro cents a kWh in 2015 and reduce the expansion to about 2,500 megawatts a year, according to an Economy Ministry document prepared for a Jan. 22-23 meeting of Merkel’s coalition. Developers would get the current subsidies if their units are authorized before Jan. 22 and enter operation this year, it said.

Vattenfall is investing in the gas power plant in the Berlin district of Lichterfelde following a 2009 agreement with the city to halve carbon dioxide emissions by 2020 in relation to 1990 levels. Gas-fired plants are struggling to compete with wind and solar generation that gets preferential access to the grid, and coal-fired stations that benefited from a slump in the cost of carbon permits needed to burn the fuel.

Carbon permits are “meaningless” at the current price of around five euros per metric tonne, making it harder for gas to compete with coal-fired stations, GE’s Reimelt said. European Union member states approved measures earlier this month to curb a glut and postpone the sale of 900 million carbon permits from between 2014 and 2020 to between 2019 and 2020.

To contact the reporter on this story: Alex Webb in Munich at awebb25@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net


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