Munich Utility Invests in U.K. Windmills to Meet Renewable Goal

The head of Munich’s municipal utility expects to produce enough renewable energy next year to meet demand from all the households in southern Germany’s largest city.

The growth will enable Stadtwerke Muenchen GmbH, whose customers include Germany’s largest engineer Siemens AG, to overtake its counterpart in Cologne this year and become the largest municipal utility in Germany, Managing Director Florian Bieberbach said in an interview last month. The expansion comes from investment in offshore wind farms in Germany and the U.K., part of a 9 billion-euro ($12.2 billion) program to supply the city entirely from renewable power by 2025.

Bieberbach said the company is benefiting from the Energiewende, the energy shift that will replace Germany’s nuclear reactors with renewable power, even though it owns a 25 percent stake in a local atomic plant. By contrast, Germany’s largest utilities EON SE and RWE AG have sold assets and pare dividends as the policy cuts profits at fossil-fuel plants.

We “will be a winner of the energy shift” because we focused early on clean-energy projects, Bieberbach said in an interview in Munich last month. “The switch to renewables is a profitable business.”

Stadtwerke Muenchen is typical of the state-owned utilities that provides power, water, gas and heating and often own the local transport network. In Munich, it even operates 18 public swimming pools.

Profit Increased

The company’s 2012 profit increased 1.1 percent to 214.8 million euros from a year earlier, while sales rose 13 percent to 4.5 billion euros. Net income at RWE dropped 28 percent in the same period.

By next year, Stadtwerke Muenchen will produce renewable power equivalent to the demand from all the city’s households and its public transport system. That’s about 3 terrawatt-hours, or 40 percent of total consumption in the industry-heavy city.

Most of that will come from stakes in two wind farms in the German North Sea as well as the 2 billion-euro Gwynt y Mor project off North Wales, where Stadtwerke Muenchen has a 30 percent stake.

Chancellor Angela Merkel is shifting Germany away from nuclear power in favor of renewable sources such as solar and wind following the meltdown at Fukushima in Japan in 2011. Her government intends to raise the share of renewables to at least 35 percent by the end of the decade, up from 22 percent last year, and to at least 80 percent by 2050.

Other municipal utilities have found the adjustment more difficult than Munich’s.

“It was consensus that the decision to exit nuclear power would turn the stadtwerke into beaming winners,” Michael Feist, chief executive officer at Stadtwerke Hannover AG, said in an interview in Munich.

‘Difficult Situation’

Two and a half years after Merkel’s decision, he sees a “difficult situation” for the municipal utilities which “will continue for another three to four years.”

He and Bieberbach called on the coalition that emerges from Sept. 22’s federal election to rejig the energy market to reward conventional power plants for providing security of supply. Wind and solar plants are dependent on the weather, requiring back-up from gas- and coal-fired generators. Conventional plants are being undercut by a system that subsidizes renewable plants, Feist said.

Municipal utilities’ generation capacity of 20,434 megawatts last year gave them an 11.7 percent share of the German total, down from 12.6 percent a year earlier, according to their Verband Kommunaler Unternehmen e.V. association. Their share of renewables capacity rose by 2.7 points to 11.4 percent, while capital expenditure fell to 6.2 billion euros from 8.6 billion euros.

“Our profit margins decrease in the sales business because of strong competition, in the regulated distribution grid business and in conventional power generation,” said Josef Hasler, managing director at Nuremberg’s Staedtische Werke Nuernberg GmbH.

Integrating new renewables plants into distributions networks is expensive, increasing spending on grids by 50 percent at a time when lower wholesale power prices are reducing profits, he said.

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