Siemens Says German Energy Switch on Track for Failure on Costs

German Chancellor Angela Merkel’s plan to exit nuclear energy and switch to a greater share of renewables may fail because costs and greenhouse gas emissions are increasing, the head of Siemens AG (SIE)’s energy division said.

Germany is burning more coal because gas plants are not economical, subsidies for renewables are pushing up power prices, and a greater share of fluctuating renewables threaten the stability of electrical grids, Michael Suess, chief executive officer of Siemens Energy, said today at a conference organized by Merkel’s CDU/CSU parliamentary faction in Berlin.

“We’re not on course at the moment,” Suess said. “Energy must remain affordable for a modern industry that offers the basics for a clean and sustainable society.”

Merkel is attempting to lead the biggest transition to renewable energy of any developed country in history, seeking to more than triple the share of renewable power by 2050 to 80 percent of the nation’s total consumption. Talks between her government and state leaders on proposals to stop power prices from rising failed this month, delaying concrete steps from being taken until after elections in September.

Germany should overhaul its EEG clean-energy subsidy law so that renewable generators get subsidies only when the produced electricity is in demand, Suess said. That would help stabilize costs and the power grid that’s suffering from a “giant power plant” of more than 30 gigawatts of solar generators that shut on and off depending on the weather, he said.

The country’s renewable energy boom means reduced running times at stations fired by natural gas, which fueled 11 percent of Germany’s power output last year.

C02 Footprint

“We’re increasingly pushing gas and even modern coal plants out of the market,” Suess said. That boosts profits at lignite plants with “a very high CO2 footprint.”

Germany’s biggest utility EON SE depended upon a deal signed last week with German regulator Bundesnetzagentur and grid operator TenneT TSO GmbH to keep open the loss-making Irsching gas plant, one of the world’s most efficient. Siemens provided the gas turbines at the plants.

RWE AG (RWE), Germany’s second-largest utility and Europe’s largest carbon dioxide emitter, churned out 11 percent more greenhouse gases last year as coal-fired plants increased production, according to the company’s annual report. Their profitability has been increased by the collapse in carbon permits to record lows, cutting the cost of burning coal.

To contact the reporter on this story: Stefan Nicola in Berlin at snicola2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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