RWE is one of Europe’s five biggest electricity and gas utilities. Our business activities extend along virtually the entire value chain from lignite mining, biomass, and oil and gas production, through the generation of electricity, to distribution and supply of electricity, gas and heat. Our biggest challenge over the long term is to implement the energy transition in Germany and the effects on the European energy market.
Europe is our market. Here, RWE produces around 110 million metric t of lignite each year, generates 227.1 billion MWh of electricity and supplies around 16.4 million customers with electricity and some 7.7 million customers with gas. We also supply industrial partners with process heat. Furthermore, RWE offers its customers comprehensive services and advice, and develops innovative concepts for the use of electricity, gas and heat.
The challenge of the energy transition
In 2011, Germany launched a fundamental directional change in relation to the supply of electricity. No other country in Europe has ever implemented a similar change of course at this speed and of this magnitude. We generate more than two thirds of our operating result in Germany. The effects of the energy transition therefore define the entire Group.
After the reactor catastrophe in Fukushima, the German Government announced a significantly accelerated exit from nuclear energy. The first nuclear power stations were already switched off in 2011, including our Biblis power station. At the same time, the supply of electricity from renewable energies, in particular from photovoltaics, increased substantially. The speed of expansion undergone by photovoltaics exerted unexpected impacts on the energy industry and on the Federal Government itself. As a consequence of these developments, the issues of regional availability of electricity, and the stability of electricity grids and energy prices gained a higher profile in the public debate.
The expansion of renewable energies is intended to promote low-carbon electricity generation. The feed-in remuneration rates under the Renewable Energies Act (EEG) have led to an enormous expansion of photovoltaics. As a consequence, gas-fired power plants are being driven out of their traditional market segment, in particular the provision of peak load around midday. Their operating times are often reduced to 1,000 hours a year and less. This means that they are no longer profitable in many cases. The European Union for the Transmission of Electricity is also driving German solar and wind power into the Dutch market. This is also reducing the operating times of our Dutch gas-fired power stations. Building new pumped-storage power stations and the operation of older coal-fired power stations are now often barely profitable.
The expansion of renewable energies means that electricity generation is becoming more decentralized and at the same time more volatile. The burden on the transmission and distribution grids and the need to have sufficient reserve capacities available is increasing significantly. RWE faces two major challenges here. On the one hand, our distribution grid has to accept the additional amounts of electricity from decentralized electricity generation and provide consumers with the required amounts of electricity, meeting their needs with intelligent management and distribution. On the other hand, we need to adapt our generation capacities to the changed circumstances in the electricity market and make the required amounts of electricity available to meet demand, particularly if the renewable energies are not operating at that point.
At the same time, electricity prices for residential customers are rising, particularly due to the feed-in fees for renewable energies. As a result, an intensive discussion about electricity prices has been conducted in Germany since 2012. As a direct partner for customers, we are naturally significantly involved in the discussion about electricity prices.
RWE power station portfolio
As a result of the exit from nuclear energy adopted by the German Parliament (‘Bundestag’) in June 2011, part of the low-cost electricity for the base load has been eliminated. The absent generation capacities can currently only be replaced by conventional power stations at reasonable prices.
RWE is in a relatively favourable position. We are able to fall back on large reserves of cost-effective lignite. The reserve licenced for extraction will last for the next 30–40 years. We operate three major opencast mines in Germany (RWE Power) and two smaller mines in Hungary (MATRAI EROMÜ) where we produce around 110 million metric t of lignite each year. 101 million metric t of this lignite are used to generate electricity and the remaining 9.2 million metric t are refined to manufacture lignite products. In 2012, commercial operation of the lignite-fired power station with ‘Optimised Units’ (BoA 2&3) started up with a net output of around 2,100 MW. This is a central part of our power plant renewal programme. The new power station provides cost-effective power generation and can flexibly adjust its output to the prevailing electricity demand and the fluctuating feed-in from renewable energies. By comparison with the existing power stations, which were decommissioned when this plant came on stream, the new power station emits up to 6 million metric t less CO2 each year at equivalent levels of electricity generation on account of its high level of efficiency. Two coal-fired power stations are currently also being constructed, each with more than 1,500 MW of output. Overall, RWE had generating capacity amounting to almost 11,100 MW from lignite-fired power stations and around 7,600 MW from coal-fired power stations at the end of 2012, not including contracted power stations.
We are able to significantly reduce our CO2 emissions by co-combustion of biomass in coal-fired power stations. Substantial quantities of biomass are used in the Amer (Netherlands) and Mátra (Hungary) coal-fired powers stations. We have also converted three units to the combustion of biomass at the Tilbury coal-fired power station in the United Kingdom. This means that our capacity for generating electricity from renewable energies also increased significantly in conventional power stations during 2012.
Additionally, we significantly expanded the capacity of our gas-fired power stations in 2012 to a current level of nearly 15,600 MW when the Pembroke power station (United Kingdom, 2,181 MW) and Claus C and Moerdijk 2 (Netherlands, 1,304 MW and 426 MW respectively) came on stream.
The fossil-fired power stations were essentially operated by RWE Power, Essent, RWE npower and MATRAI EROMÜ at the close of 2012. Since 1 January 2013, the newly established RWE Generation has been responsible for the construction and operation of our power stations in Germany, the Netherlands, the United Kingdom and Turkey. The lignite-fired opencast mines and power stations, the refinement facilities, and the hydropower plants and nuclear power stations continue to be operated by RWE Power, which is integrated within RWE Generation. After shutting down the Biblis A and B power stations, we still have 3,901 MW capacity of nuclear energy. Following the exit from nuclear energy adopted by the German Parliament (‘Bundestag’) in June 2011 our last nuclear power station is scheduled to exit from the grid in 2022.
When we established RWE Innogy in 2008, we launched a systematic and rapid expansion of renewable energies. RWE Innogy bundles the expertise and power plants of the RWE Group in the field of renewable energies. Our target market is Europe. One focus of activities is on offshore and onshore wind power projects. However, RWE Innogy is also involved in hydropower plants and biomass. At the same time, we support the development of future technologies, such as biogas plants and solar thermal plants, as well as investing in innovative companies. We support them in their start-up and growth phase and provide pump-priming financial assistance for a limited period of time.
At the end of 2012, the entire RWE Group had consolidated generating capacity from renewable energies amounting to 4,133 MW, of which 802 MW was hydropower, 2,165 MW was wind energy and 1,161 MW was biomass.
So far, RWE has only erected a limited number of photovoltaic plants. Our focus in the utilisation of solar energy has been on the development of thermal solar power plants. In Spain, we joined forces with partners in 2011 to operate the solar thermal power plant Andasol 3, which generates an output of 50 MW. In the future, this could form the basis for further projects in North Africa in the context of the Desertec initiative. At the close of 2012, our total power station capacity amounted to 45,354 MW plus an additional 6,623 MW capacity with contracted power stations, with long-term contracts providing us with access to their capacities.
Production of oil and gas
RWE Dea based in Hamburg engages in international exploration and production of gas and oil. The company has production facilities in Germany, the United Kingdom, Norway, Denmark and Egypt. It also has licences for carrying out exploration in Algeria, Ireland, Libya, Mauretania, Poland, Trinidad and Tobago, and Turkmenistan. In Germany, RWE Dea also has a large underground gas storage facility. RWE Dea is thereby making a contribution to security of supply with energy in markets including our core markets of Germany and the United Kingdom.
In 2012, RWE hived off its electricity transmission grid in Germany and now only has a minority shareholding in Amprion. We sold most of our shares in Amprion to comply with the regulatory requirements for separating the distribution grids from the generation of electricity. Our responsibility therefore concentrates on the operation of electricity distribution grids. We operate these mainly in Germany (343,750 km), and in Hungary (46,047 km) and Poland (15,550 km). Our distribution grids play a key role in secure electricity supply. They form the interface between the transmission grids and decentral generation on the one hand, and our customers on the other hand. The energy transition means that the importance of the distribution grids is increasing significantly, because electricity generated from decentral sources is fed almost exclusively into these grids. At the end of 2012, around 250,000 photovoltaic or wind-power plants fed a total output of 15.1 GW of electricity into our German distribution grid. Over the course of the past three years alone, capacities amounting to 5.9 GW have been added. We are working intensively on concepts to establish how renewable energies and decentral generating structures can be integrated intelligently into the electricity grid.
Furthermore, we operate extensive gas distribution grids. In Germany, we have a gas distribution grid of 37,050 km, and in the Czech Republic we have a gas distribution grid of 64,500 km and a gas transmission grid of more than 3,600 km. However, this is currently up for sale. We are therefore supplying residential and commercial customers, and major industrial customers and distributors like municipal utilities.
New areas of business
The changes in the energy industry also yield new market opportunities. There is an increasing demand for services associated with the use of energy. In Germany, the Netherlands, the Czech Republic and Hungary, our companies offer solutions for central and decentralized energy supply. Our packages are directed towards residential households, as well as to local authorities and business customers. They also encompass joint ventures for further expansion of renewable energies. In April 2010, RWE Innogy and 26 municipal utilities established the Green GECCO joint venture. The aim of the company is to jointly develop and carry out projects in the field of renewable energy production. The joint venture covers German and European projects in the areas of wind power, biomass, geothermal power, biogas, hydropower and solar thermal power. The demand for individual control of consumption is increasing. We can perceive opportunities for electromobility here. Synchronising battery charging with the way the supply of electricity generated from renewable sources fluctuates over time could make an important contribution to stabilisation of the grid. During the course of the business year 2012, we continued to expand the charging infrastructure for electromobility and we have now become one of the biggest operators of charging infrastructure in Europe.
Energy trading and internal services
RWE Supply & Trading forms the interface between the RWE companies and global trading markets for energy and energy-based raw materials. It forms the hub in the RWE Group for all tradable commodities, e.g. gas, coal, oil and electricity. RWE Supply & Trading engages in trade for these commodities both physically and in the form of derivatives. The trading portfolio also comprises emissions certificates, cargoes, weather hedges and renewables. RWE Supply & Trading is also responsible for economic optimisation of the entire non-regulated gas business of the RWE Group, including all procurement, transport, storage and LNG activities. The Head Office is based in Essen (Germany) with trading floors or branches in the United Kingdom, the Netherlands, Switzerland, the Czech Republic, Singapore and the USA, with a representative office in Turkmenistan.
We have integrated services provided across the Group in RWE Service and RWE IT.
Our contribution to the energy transition
RWE is involved in the energy transition with important company divisions. Construction of our new coal-fired power stations is enabling us to make a major contribution to creating a secure supply of electricity. We are concentrating a significant proportion of our investment drive in new-build projects focused especially on wind farms. Our distribution grids play a key role in the integration of renewable energies within the supply of electricity. The key focus is on expansion of grid capacities. On the other hand, we are developing intelligent controlling systems for feed-in of renewable energies based on demand. Our consumers are also being integrated in the new concepts. Their consumption behaviour is to be synchronised more effectively with the supply of electricity. We also support our customers in using energy efficiently.