The good news on the climate change front these days is the extraordinary rise of renewable energy sources in the electric utility industry in Germany. Accounting today for more than 25% of electricity production in the country, decentralized solar and wind energy has led to the precipitous decline of fossil fuel-based utility industry during the past few years. Among the casualties in this energy battle are the huge losses reported this week – in the tune of €2.8 billion or $3.87 billion – by Peter Terium, CEO of RWE, one of Germany largest utility companies:
German energy giant RWE has taken a massive loss of €2.8 billion – it’s first loss in 60 years – after admitting it got its strategy wrong, and should have focused more on renewable and distributed energy rather than conventional fossil fuels.This declining trend in the utility industry had been predicted by market analysts for years, since large Germany utility companies have small portfolios in renewables, the market of which had been captured by smaller off-grid companies and energy contractors catering to home and industrial consumers:
. . . Last night, Peter Terium, who has been CEO for less than two years, conceded that the company had got it wrong. He admitted that the change in electricity markets, which has seen earnings from conventional generation gutted by the impact of solar and wind energy, was “unstoppable”. It was now time to change strategy, and focus on what the electricity market will look like in the future.
. . . Analysts have been pointing this out for years. Indeed, the big three German utilities have accounted for just 7 per cent of the renewable energy installations that now account for more than one quarter of the country’s generation, and which have transformed the market. Most renewable capacity has been installed by home and industrial consumers, and smaller and smarter energy companies.For more on this breaking news, jump over the curlicue...
Last year, already seeing the handwriting on the wall, RWE declared a strategy of moving its fossil fuel-based utilities to renewables in order to survive as an industry – either adapt or wither away and die:
We may be about to witness one of the most profound transitions ever to occur in the utility industry. Challenged by the surge in distributed renewables and a strong decline in revenues, one of Europe's largest largest utilities, RWE, is reportedly planning to completely transform itself from a traditional electricity provider into a renewable energy service provider. The utility's new philosophy: either adapt -- or wither away and die. “The massive erosion of wholesale prices caused by the growth of German photovoltaics constitutes a serious problem for RWE which may even threaten the company’s survival,” wrote the utility in a recent strategy paper.The Economist magazine reported last year of a strange new phenomenon that occurred in the German electric utility industry – having to pay grid operators to accept electricity that the utilities generated:
On June 16  something very peculiar happened in Germany’s electricity market. The wholesale price of electricity fell to minus €100 per megawatt hour (MWh). That is, generating companies were having to pay the managers of the grid to take their electricity.There you have it, folks! Renewables are beginning to “shoulder” fossil fuels aside… who would’ve thought that it could happened so soon.
. . . These events were a microcosm of the changes affecting all places where renewable sources of energy are becoming more important—Europe as a whole and Germany in particular. To environmentalists these changes are a story of triumph. Renewable, low-carbon energy accounts for an ever-greater share of production. It is helping push wholesale electricity prices down, and could one day lead to big reductions in greenhouse-gas emissions. For established utilities, though, this is a disaster. Their gas plants are being shouldered aside by renewable-energy sources. They are losing money on electricity generation. They worry that the growth of solar and wind power is destabilising the grid, and may lead to blackouts or brownouts. And they point out that you cannot run a normal business, in which customers pay for services according to how much they consume, if prices go negative. In short, they argue, the growth of renewable energy is undermining established utilities and replacing them with something less reliable and much more expensive.
One wonders when such a globe-saving trend that significantly shifts fossil fuels to renewables in the utility industry will happen in the US and other developed countries?