Safeguarding our future generation base5 September 2002
Rainer Elsässer, board member, E.On Energie AG, Munich, Germany
Within the next two decades, about one third of Europe's generation capacity, amounting to about 200 000 MW, will reach the end of its calculated operating life. In Belgium, Sweden and Germany, the implementation of the governments' decisions to phase out nuclear energy would further increase the need for new power plants. In Germany alone, the phase-out of nuclear energy will require the replacement of half of the installed baseload capacity.
The necessary replacement activities will take place in a difficult and politically restrictive environment. Since Kyoto, international climate protection policies that penalise CO2 emissions have become fact. The European Union has committed itself to an 8 per cent reduction in CO2 emissions by 2010 compared with 1990. This is an ambitious goal. Germany, being the largest source of CO2 emissions in the European Union, has agreed to shoulder a disproportionately large burden: before the Kyoto follow-up conference in Bonn in 2001, Germany had to assume 75 per cent of the EU-wide reduction load but after the Bonn summit the German share amounted to 112 per cent. Thus, Germany should reduce more than the European Union as a whole! The basic question therefore is: what will our future generation mix look like in a political environment that rejects nuclear and penalises CO2 emissions? At this stage, we still have more questions than answers.
Politicians and public opinion pin their hopes on renewables and believe that they will provide the long-awaited solution for a sustainable and climate-friendly power supply in the future. Only a few weeks ago, during the Earth Summit in Johannesburg, it was decided to foster the role of renewables in world energy supply. The truth is, however, that at present renewables are not competitive in the market - other than large hydro-power, of course.
During the last few years, Germany has become the world front runner in wind energy. This development is mainly owing to the high subsidies paid via the German feed-in law. But, because of unreliable availability, wind power cannot replace conventionals on the scale needed. Moreover, the stochastic availability of wind power generates additional costs from the increased need for balancing power, for necessary investments into the grid infrastructure and due to the devaluation of existing power plants (which have to back up wind power in case of calm). In sum, these costs make wind power 3 to 4 times more expensive than electricity generation in fossil or nuclear plants.
The European power industry actively supports the political goal of reducing CO2 emissions, but our concepts for achieving this goal differ from those being discussed in current political debates. We believe that the further development of existing and economically viable power generation technologies can create huge potentials for reducing CO2 emissions. From all we know today, increased efficiencies offer the most economic way of avoiding CO2. During the last 50 years, we have doubled the efficiency of power generation: instead of needing 600 g of hard coal for the production of one kWh, we need nowadays less than 300 g in a modern power plant. Due to improved efficiency of use, the consumption of energy is growing at a lower rate than the economy. The results of the already achieved resource productivity can be seen when looking at the relatively low specific CO2 emissions in Germany - CO2 emissions per head are 40 per cent lower in Germany than in the United States.
Another CO2 reducing option would of course be combined cycle gas turbine (CCGT) plants. The first advantage is the low investment cost which reduces financial risks and "political vulnerability". Second, the low rate of CO2 emissions makes CCGT an attractive alternative.
Gas-fuelled power generation, however, suffers from high price volatility. And price volatility could easily increase owing to growing worldwide gas demand, political instability in the producing countries and, possibly, a future gas-OPEC.
It should be clear that gas alone cannot safeguard our future generation base. It should also be clear that if energy policy goes in the wrong direction, it will be our industry that will have to cope with the consequences. Therefore, it is in our own interest to convey a clear message to politicians: keeping up a diversified generation mix including coal and probably nuclear will eventually be essential both for our national economies and our electricity industries.
We should especially demonstrate our willingness to support the further development of existing and economically viable power generation technologies. We must work hard to create the public climate that is necessary if we want to safeguard an economically viable and competitive generation base in Europe.