“The energy transition won’t work without creating local jobs”

Tagesspiegel: Mr Krebber, you have been CEO of RWE, the largest German energy company, for just over two years now. How many years have you aged during this time?

Markus Krebber: Just by two years, I hope. But you are right, it feels a lot longer. RWE is pursuing a new strategy, completely focusing on green growth. We have also brought the exit from coal forward by eight years, to 2030. In addition, we significantly enhanced our renewables position in the US with an acquisition worth almost six billion euros. And we also have a lot of crisis management to contend with since the Russian attack on Ukraine.

Tagesspiegel: Has Germany dealt reasonably well overall with the cessation of gas imports from Russia?

Markus Krebber: We should be happy enough for now. We have done plenty of things right and we have also been lucky at times. The gas supply was diversified quickly thanks to a well-coordinated European effort and the infrastructure for importing liquefied natural gas (LNG) has been built up. All fossil fuel-fired power plants that had still been available were quickly put back into operation. And the last winter was relatively mild. However, we must expect this tense situation to continue. My biggest worry at the moment is that we have hardly any reserves left in the energy system to draw on, neither in terms of electricity nor for gas.

Tagesspiegel: Do you mean electricity generation, the grids, gas flows?

Markus Krebber: In Europe, we have practically no reserves for generating power. We simply do not have enough power plants that can produce power 24/7 or can be started up at any time. The situation in terms of the gas infrastructure is critical. Should one of the large important pipelines fail, for example from Norway, we would be faced with an enormous problem straight away. An extremely cold winter could also cause difficulties for us. The energy system should never run to full capacity, there should always be some reserves.

Tagesspiegel: But isn’t this situation changing rapidly with one LNG terminal after another being commissioned right now?

Markus Krebber: Well, for a long time all the talk was about the new and improved “LNG speed”, which was to serve as an example for other infrastructure projects. However, progress is not currently being made as quickly as we had hoped. We are lagging behind the original plans for building new LNG capacities.

Tagesspiegel: The planned capacities were overdimensioned anyway. In particular, the terminal in Lubmin has been criticised in this regard, although you are not active there anymore.

Markus Krebber: In my view they are not overdimensioned at all. Germany must also be able to supply Austria and parts of Eastern Europe. In addition, Lubmin is a very suitable location and contributes greatly to security of supply, especially in eastern Germany. The gas can be fed into the grid to replace the gas from the Nord Stream pipeline.

Tagesspiegel: The Ministry for Economic Affairs is currently working on the rules for ensuring security of supply with back-up power plants that kick in during electricity shortages. We are talking about a massive 25 gigawatts of capacity in total, almost a third of the maximum demand for electricity in Germany. What should the Power Plant Strategy 2026 with the tendering rules entail in your opinion?

Markus Krebber: First and foremost, it is important that we get clarity quickly. The exit from coal will look doubtful if we don’t have clear rules for new plants in place by the end of this year. Planning and building a new hydrogen-ready gas-fired power plant takes five to six years, so things will get tight. We need clarity with regard to remuneration for these power plants, but we also need clarity in terms of the hydrogen grid and conversion rules. As an operator, I cannot choose a power plant site if I am not sure how I can get H2 there and what the rules will be for using it.

Tagesspiegel: Currently, the Ministry for Economic Affairs is tending towards using a model for remunerating every single kilowatt hour – it is hoped that Brussels is more likely to greenlight the rules in terms of potential illegal subsidies in this way.

Markus Krebber: I can only warn against taking such an approach. A remuneration of generated kilowatt hours would be completely counterproductive. By design, these power plants are intended to run as little as possible, because the fuel needed to operate them will be very expensive – especially once the system is converted to hydrogen. The incentive should be the other way around entirely. The plants need to be built at the lowest possible cost and only generate power in emergencies. So the capacity, not the electric output, should be incentivised. Otherwise the operators will be forced to do something that is damaging to the national economy and let the plants run as much as possible. That is just not feasible in the long term.

Tagesspiegel: You took over Con Edison Clean Energy Businesses in the US for a good six billion euros this year. With the Inflation Reduction Act, the energy transition is being heavily subsidised over there. What should Europe learn from that?

Markus Krebber: I think there are three key differences. Firstly, the US has created security of investment with the rules not being challenged for at least ten years. That is a great incentive for potential investors. In Europe, on the other hand, debates that may lead to the rules being challenged or adapted could flare up at any time.

Secondly, the system there is less complicated. It is clear exactly how much of a subsidy will be paid per kilogramme of green hydrogen or one kilowatt hour of green electricity. And things move fast. Here, however, the rules are often complex and it takes a long time to get things done. We have been waiting, for example, for one and a half years now to be notified as to whether our funding application for Germany’s largest electrolyser has been approved.

Lastly, the Americans strongly incentivise local value creation. This helps with public acceptance and creates security for the supply chain. In Europe it wasn’t even possible to agree on effective rules. One option in this context would be to include local content in the funding rules, another one to prioritise it in tender processes.

Tagesspiegel: This comes as another surprise to us. We would have expected you to be an advocate of globalisation, instead you are proposing indirect trade barriers.

Markus Krebber: The energy transition won’t work without creating value locally. There will be plenty of jobs in producing the components and building the plants. However, not very many personnel are needed to operate them. If Europe is built up with wind and solar farms without creating jobs at a larger scale, it will be difficult to get the population to accept the plants.

Tagesspiegel: RWE is also still operating lignite-fired power plants in North Rhine-Westphalia. Do you want to get rid of lignite before the planned decommissioning of all plants in 2030? You would no longer be subjected to the criticism of being a major emitter of greenhouse gases.

Markus Krebber: We have only just brought the exit from coal forward by eight years to 2030. We will be open to policymakers suggesting other political solutions before then. However, I would not consider a potential sale of the plants a positive way forward. Most parties that may possibly be interested in acquiring the power stations would want to squeeze the last drop of blood from them. That wouldn’t solve any problems. On the contrary. As a major employer, we are in a far better position to fulfil our social responsibility to our employees. In my view the sale of inconvenient assets is counterproductive in terms of sustainability.