European utilities: Will a growing renewable focus benefit CSP?
E.ON’s bold decision to focus solely on renewable generation raises the question of whether CSP might be needed for base-load power by like-minded European utilities.
By Jason Deign
E.ON’s reinvention as a renewable energy-only company might sound like potentially good news for CSP. But developers should be wary of breaking open the bubbly just yet, CSP Today has found.
While a wider move to renewable-only operations by European utilities might foreshadow greater CSP demand for base-load provision, in practice it remains unclear whether E.ON’s lead will be followed by others.
RWE, another German utility giant, was this January reported to be cutting back on its renewable energy business in order to cope with debts of €31 billion (USD$36.7 billion).
Its €1 billion-a-year investment into green energy arm RWE Innogy, which primarily operates in Germany, UK, Poland, Italy and the Netherlands, will be cut to €1 billion for the entire period between now and the end of 2017, Reuters said.
And Dr Michael Murphy, of RWE’s group media relations team, confirmed to CSP Today that the company will be focusing on gas for base-load supply in the foreseeable future.
“Conventional power generation continues to be a partner for renewables, providing high-performance base-load and capacity, and therefore security of supply,” he says.
“With renewables’ new position in the merit order, more emphasis is placed on modern and flexible conventional power plants which can provide power quickly when there is not enough sun or wind.”
Murphy notes that RWE is the largest operator of flexible gas power plants in Europe and the fourth in terms of gas-based generation. RWE Innogy also has a 12.5% share in Andasol 3 CSP plant in Spain.
Experience tainted
The company’s experience of CSP has likely been tainted by the impact of regulatory changes in Spain, though.
RWE is already suing the Spanish government for “a low-triple digit million euro amount” because of losses to its wind and hydro assets, according to Reuters, and is known to be mulling legal action over Andasol.
“From a technical perspective, we are pleased with the results from Andasol 3 so far,” Murphy says.
However, he continues: “While a diverse portfolio, which includes different forms of renewable generation, is important, RWE does not plan further investments in this area at this time and will, instead, concentrate on power generation from wind and water.”
E.ON appears similarly unlikely to rush into further CSP investments any time soon. The company partnered with Abengoa Solar on the construction of the 100MW Écija Solar Platform parabolic trough development in Seville, Spain, back in 2009.
The Platform is made up of two 50MW plants, HelioEnergy 1 and 2, which came online in 2011 and 2012 respectively. But these investments, too, have been badly hit by the cuts in Spain.
In 2013 it was reported that the Luxembourg-based Abengoa subsidiary CSP Equity Investment would be fighting the Spanish government in the Permanent Court of Arbitration in The Hague for compensation over losses to HelioEnergy and other projects.
And last November, as it announced its new corporate strategy of focusing on renewable energy and spinning off traditional power generation, E.ON also said it would be divesting its Iberian operations to “increase financial flexibility for the new setup,” according to a press note.
Assets sold
E.ON’s Spanish and Portuguese assets are being sold to the Australian investment house Macquarie, for €2.5 billion.
In addition, the utility said it was evaluating the disposal of its Italian operations, which would severely limit access to high direct normal irradiance markets suitable for CSP development in Europe (E.ON’s presence in Turkey appears to be unaffected by the move).
Markus Nitschke, of E.ON’s political affairs and corporate communications team, confirms the company will be looking to conventional generation for base-load capacity in the short to medium term. “This will be the main task of the company E.ON spins off,” he says.
This does not mean to say CSP might not some day become a valued component of carbon-free base-load generation portfolios, he points out. But there has to be a deep reorganisation of Europe’s energy markets beforehand.
“If the market or the government is willing to pay for energy storage and security of supply, and if there are similar systems for capacity markets in Europe, CSP can have quite good perspectives,” Nitschke comments.
“A pre-condition is that CSP is competitive to other renewables, especially on- and offshore wind. Within a European energy market, many things are possible [if] the market is not that fragmented as today.”
The opening up of European energy markets is one of the main tasks handed over to the European Union’s new Climate and Energy Commissioner, Miguel Ángel Arias Cañete, last year.
Whether this work will end up favouring CSP and other renewable energy sources very much remains to be seen, however.
Cañete’s credentials include running an oil-related business and managing the environment portfolio within the same Spanish administration that has wrought havoc on Spain’s renewable energy sector: hardly the best person for the CSP industry to pin its hopes on.