E.on, Germany’s largest electric power producer, announced that it had lost over 7 billion euros in the 3rd quarter, reports Germany’s flagship news magazine Spiegel here.
The loss stems from the writing down of the value of coal and gas power generation assets by billions of euros due to the steep drop in wholesale electricity prices. The write-offs were necessary in light of the dismal future the fossil industry faces. Plainly said: Germany’s Energiewende, transition to renewable energies, which mandates power companies buy up solar, wind and other green energies at exorbitant prices, and even when they are not needed, continues to rapidly erode the German base-power production.
Tens of thousands of once high-paying industrial jobs are now in serious jeopardy.
“Squeezed out” by massively subsidized green energy
With mandated green energies, the European power market is seeing a huge oversupply of power on the market that has wholesale prices far too low to cover generation costs.
The company’s gas and coal power plants are hardly earning money due to the plummeted power exchange prices. Through the [massively subsidized] green energies, the conventional power plants are being squeezed out of the market throughout the branch. The price at the Leipzig EEX power exchange has halved over the past 4 years.”
Aren’t government subsidies and market meddling wonderful?
The hemorrhaging is far from over. Spiegel also reports that “E.on had a record 3.2 billion Euro loss in 2014“. Germany’s No. 2 power producer, RWE, is also reeling. Bloomberg here writes:
Germany’s shift to renewable energy is hurting utilities from EON to RWE AG as margins get squeezed at traditional coal and gas-fired plants because green power gets priority access to the grid. EON, the third-worst performer in Germany’s DAX stock index this year, is responding by spinning off its fossil-fuel plants into a separate company. RWE in 2013 had its first annual loss since 1949.”
Poor, working class getting hit hard
The tragedy of this mandated oversupply is that low wholesale prices, which at times are even negative, are not getting passed along to the consumers. Rather next year German consumers will see new record-high electricity prices. Already poor households are reeling and electricity is becoming a luxury for the affluent only.
The media reports that the Düsseldorf-based power producer will be spinning off its “entire power plant business” in the form of a new company called Uniper at the end of the year. It is reported that E.on itself will focus on “renewable energies and sales”.
It’s a real pity. Germany’s power companies used to be solid, high tech companies that delivered the most stable and efficient power in the world. Now they are literally being gutted alive before our very eyes. The country is setting itself up for some terrible times, and doing so fast.
Industrial base, social fabric in collpase
One could easily argue that Germany, under the leadership of Angela Merkel and her CDU government, is now witnessing an uncontrolled collapse as millions of refugees flood into the country, power prices spiral out of control, conventional power companies collapse, the industrial base moves abroad, and auto-giant VW faces a death by litigation and fanatic environmental standards. Expect volatile social conditions to spread soon unless sense returns.