RWE drops biomass power, adds biomass thermal, wind

By Anna Simet | March 12, 2015

While RWE Group reported it achieved its earnings targets for 2014 and EBITDA was significantly better than planned, low electricity prices and unusually mild weather negatively affected business performance, which dropped 25 percent from 2013 to 2014.

Peter Terium, CEO of RWE, said that currently, 35 to 45 percent of the utility’s conventional power stations are no longer making any money under current market conditions. “I am not talking about book values—these power stations are costing us real money,” he said. “We cannot avoid the sobering fact that conventional power generation is hardly viable any longer under current market conditions.”

He added that recent modernizations of RWE’s portfolio of power stations haven’t paid off, and that it is difficult to keep a gas or hard coal-fired power station commercially feasible. Previous Investments have made RWE the third-largest gas-fired power station operator in Europe, with capacity of around 15,000 megawatts across the continent. “Considering how quickly the electricity wholesale price fell in recent years, it would be impossible to cut a power station’s costs at the same rate to maintain margins or even make any profit at all,” he said.

Constructing new biomass electricity plants will no longer be one of the company’s focal points, according to Terium. The company closed its Tilbury power station in the U.K. in the summer of 2013. The plant had a net installed capacity of 742 MW and ran on coal before being converted to biomass in 2011. “Despite the conversion, it was subjected to a lifetime limitation in compliance with emission laws,” Terium said. RWE also sold 80 percent of its stake in its 18.7 MW Enna, Sicily biomass-fired station at the end of September, he reported.

However, biomass thermal is still making its way into the company’s portfolio. In 2014, RWE opened a 46-MW, biomass-fired thermal power station that was commissioned in March near Markinch, Scotland.

Overall, operating results for RWE’s renewables division decreased by 8 percent to EUR 186 million. “A key contributing factor was the impairment we recognized on facilities such as the new 46-MW biomass power station at Markinch, in Scotland,” Terium said. “The drastic reduction in green energy subsidies in Spain and the transfer of German biomass activities to supply and distribution networks Germany as of Jan. 1, 2014, contributed to this decline in earnings. In contrast, a positive effect came from one-off earnings from compensation payments for third-party delays in completing the Nordsee Ost wind farm. The expansion of wind power capacity also positively influenced the result, and the burdens from impairment losses in 2013 did not recur.”

RWE’s current focus is on onshore and offshore wind farms, which both Terium and RWE’s 2014 annual report stated.  In 2014, RWE’s commissioned new facilities with a total generating capacity of 320 megawatts, the majority of which was wind power.