Development of interconnected power exchange
RWE assures long-term supplies of fuel for its coal-fired power stations with the acquisition of three hard coal mines in Essen (including the Victoria Mathias Mine) and a majority interest in the 'Braunkohlen- und Briketwerke Roddergrube AG', which runs some lignite mines and briquette factories near Cologne.
The acquisition of EAG, 'Elektrizitäts-Actien-Gesellschaft vorm. W. Lahmeyer & Co.', 25 years ago founders of RWE, represents the decisive entrepreneurial step in the establishment of a supraregional interconnected electricity system. Its subsidiaries include: MKW, the 'Main-Kraftwerke AG', Frankfurt-Hoechst, KAWAG, the 'Kraftwerk Altwürttemberg AG', Ludwigsburg, and LEW, the 'Lech-Elektrizitätswerke AG' in Augsburg. After the takeover by RWE, EAG reactivates its construction activities: It designs and builds large dams and hydroelectric plants, including the 'Koepchenwerk', a pumped-storage hydrostation (132 megawatts) near Herdecke, which becomes operational in 1930.
Beginning in 1924, once the entrepreneurial prerequisites are in place, the north-south grid link between the Rhenish lignite district near Cologne and the hydroelectric plants in the Alps and on the Upper Rhine is built. Following its commissioning in 1930, it becomes possible to transmit electricity to and from the southern German electrical utilities (for example 'Energieversorgung Schwaben' and 'Badenwerk') by means of high-tension transmission (the first 220 kV transmission in Europe).
For the first time, it is now possible to run an efficient power exchange system between lignite (for base load) and the Alpine hydroelectric stations (for peak load). This line will form the backbone of the modern high-tension grid in Germany.
The supraregional interconnected grid is managed by RWE's control center in Brauweiler, near Cologne, which was commissioned in 1928 and coordinates use of the power plants and the high-tension grid. After the Second World War it will become the control center of the European interconnected system.
Due to the lack of capital in Germany following the inflation of the 1920s, RWE finances this expansion mainly by floating dollar bonds in the USA.
The sudden death of Hugo Stinnes in April 1924 means that RWE not only loses the long-standing chairman of its supervisory board, but also the man who for three decades has imposed his entrepreneurial personality on the development of the company. The inclusion of the municipalities as shareholders and the engineering of the extensive interconnected electricity grid system based on large power plant units are the result of his foresight and initiative. His successor is Albert Vögler from the Stinnes Group, who will later become Chief Executive of the German steel trust 'Vereinigte Stahlwerke AG'.
In Westphalia, local and provincial authorities pool their energy concerns. The 'Städtische Elektrizitätswerk Dortmund', the 'Elektrizitätswerk Westfalen' and the 'Westfälisches Verbands-Elektrizitätswerk' join to set up VEW, the 'Vereinigte Elektrizitätswerke Westfalen GmbH', Dortmund. Once RWE repeatedly fails in attempts to win over the Westphalian local authorities to the idea of a unified power supply, it drops out of the 'Westfälisches Verbands-Elektrizitätswerk'. VEW is now a thoroughly public company in which provincial and local authorities directly participate through the passing on of their shares in the three preceding companies. In 1930 it becomes a joint-stock company.
To secure fuel supplies to its power stations, the still young VEW acquires several collieries: 'Gottessegen' in Dortmund, 'Alte Haase' in Sprockhövel in 1926 and 'Caroline' in Holzwickede in 1927.
From the estate of Hugo Stinnes, RWE acquires 31 per cent of the shares in construction contractor Hochtief Aktiengesellschaft für Hoch- und Tiefbauten vorm. Gebrüder Helfmann in Essen. The two companies have maintained close business ties since the turn of the century.
In addition, RWE succeeds in acquiring further stakes in electrical utilities (including 'Rheinische Elektrizitäts-Aktiengesellschaft', later shortened to 'Rheinelektra'). This means that it is possible to further extend RWE's market in Rhineland-Palatinate and Lower Saxony.
So as not to stand in the way of the consolidation of the Ruhr mining industry’s gas businesses into 'Aktiengesellschaft für Kohleverwertung' (later Ruhrgas AG), RWE brings its gas supply grid under the umbrella of the new corporation in return for shares.
By contrast VEW pushes the expansion of its gas supply grid. One year later it sets up VGW, the 'Vereinigte Gaswerke Westfalen GmbH', to manage VEW's gas operations. VGW begins a generous expansion in long-distance gas within its supply grid. In consequence local gas works are shutdown.
The long-smoldering conflict of interest between RWE and the state of Prussia, which has been building up a state electricity supply grid in northern Germany since 1912, is settled in the so-called 'Power Peace'. In the contest to obtain the right to supply individual regions (including the city of Frankfurt), Prussia has opposed the expansion of RWE's market and its high-tension grid.
In addition to the demarcation of the respective areas of interest, RWE and Prussia swap their lignite holdings in the Brunswick and Cologne coalfields. So RWE comes to own lignite producer 'Braunkohlen-Industrie AG Zukunft' in Weisweiler, which also supplies electricity to the Aachen area and large parts of the Eifel uplands. Thanks to the acquisition of the former Stinnes stake, the Prussian state has been RWE's largest individual shareholder since 1925, with holdings of around 11.5 per cent.
RWE acquires a majority interest in the 'Gewerkschaft Gustav', Dettingen am Main. The electricity supply contracts held by the company, which operates a small lignite mine and an affiliated lignite-fired power plant, allow RWE to extend its market to southern Hesse and northern Bavaria.
WFG, the 'Westfälische Ferngas-AG', is set up by a number of Westphalian provincial, district and local authorities. First of all a demarcation agreement is reached with 'Ruhrgas'. Then WFG commences with the construction of the first supply lines in southern Westphalia. The plan of merging the gas businesses of both VEW and WFG fails in 1932 due to opposition of WFG shareholders.
When RWE's share capital is increased to 243 million Reichsmark, the municipalities owning a stake in RWE, along with the Rhine Province, form the municipal holding group 'Kommunale Aufnahmegruppe für Aktien GmbH' in Essen. This combines the interests of the municipalities towards RWE and ensures their influence by means of the fiduciary acquisition of shares for financially weaker municipalities.
With its exhibition 'Technology in the Home' which RWE uses to portray the use of electricity in all areas of the household, and the introduction of installment payments (for electric ovens and hot water heaters), RWE redoubles its efforts to broaden the use of electricity in the home.
Founded together with the 'Badenwerk' in 1928, the 'Schluchseewerk AG' in Freiburg puts the first phase of its three-phase pumped-storage power station in the Black Forest into operation. In the Alps, the Vermuntwerk power station of the 'Vorarlberger Illwerke AG', Bregenz/Austria, goes on line. RWE, which holds an equity investment through KAWAG, buys large quantities of the power produced. At this point, the reciprocal north-south exchange of power begins through the recently completed grid between the Rhenish lignite-fired power plants and the southern German and Alpine hydroelectric power stations.
Even after the two corporations have reached agreement and the capital stock of RWE has been increased for the planned equity swap, the intended merger of RWE and VEW is thwarted by the objections of VEW’s American bond-holders.