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What cost for renewables?

Posted 27/11/2013 by sevans

The UK’s renewable energy plans suffered a couple of setbacks this week. First came the news that PM David Cameron is considering scrapping green eco taxes, a move that would save £112 on the average annual fuel bill. And second, RWE Energy announced it has pulled the plug on its 240-turbine Atlantic Array windfarm project – which would have produced 1200MW of electricity, enough for up to 900,000 homes, according to reports on the BBC website.

While the exact reason for the pull-out remains unclear – a mixture of technical and financing issues is blamed – nevertheless, the UK government’s Department of Energy and climate Change (DECC) told that BBC that the country remains ‘well placed’ to meet its renewable energy target of 15% by 2020 and intends to deploy significant amounts of offshore wind.

Over in Germany, by contrast, Kurt Bock, chairman of the board of the world’s biggest chemical company BASF, believes that the country’s support for renewables has gone too far. At a press dinner in London last week, Bock pointed out that around 25% of German electricity is already produced from renewable energy, with government-backed price guarantees running into billions of dollars placing a huge cost burden on consumers and posing a real threat to business competitiveness, he argued.

In an interview recently in Der Spiegel journal, Bock commented on reports that EU legislators are currently considering scrapping green surcharge waivers for some energy intensive companies in Germany, including BASF. At BASF HQ in Ludwigshafen alone this would cost the group an extra €400m/year, Bock said – despite the fact that the site runs on its own highly efficient CHP (combined heat and power) plants.

Bock was particularly critical of German support for photovolatics, for which there is a high (€350/t) CO2 avoidance cost. Solar installation operators currently receive 10 times the market value of the power they produce, which is not sustainable, he said. And he also pointed, for example, to a windfarm in Germany where 20,000 litres of oil are being used annually to rotate the blades to prevent rusting – even while it is not yet connected to the grid.

Bock also had much to say about shale gas. While domestic shale gas would never reduce EU gas prices to US levels, Bock noted that it could satisfy German gas demand for at least 10 years. He dismissed fears about fracking as irrational and pointed out that BASF oil and gas subsidiary Wintershall has been extracting gas in Germany by a technique similar to fracking for decades, without incident. Yet for the past two years, BASF has been denied any further fracking permits.

Electricity in Germany is twice as expensive as in the US, while gas is triple the price, he said. If BASF’s Ludwigshafen site was located along the Mississippi rather than the Rhine, Bock commented in the Der Spiegel feature that the energy savings would be around €500m/year.

Cath O’Driscoll - Deputy editor

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