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RWE earmarks nearly $57 billion for renewables amid coal phaseouts

17 November 2021 Cristina Brooks

German utility and trader RWE plans to spend about $7 billion (€5 billion) a year to install wind, solar, batteries, flexible generation, and hydrogen globally ahead of closures for its profitable German nuclear and coal plants.

The company released its "growing green" investment strategy on 15 November, revealing how it will add up to 50 GW, or about 2.5 GW annually, of renewables and green solutions through 2030 in Europe, North America, and Asia, which it called "attractive markets."

Almost all of the investment (90%) is going to renewable energy sources and batteries, currently operating only in Germany, the utility's CFO Michael Müller said. Its offshore wind capacity will triple from 2.4 to 8 GW, while growing its combined onshore wind and solar capacity from 7 to 20 GW.

What remains of the investment will be used to grow RWE's flexible power supply in its traditional markets in Germany, Benelux, and Great Britain, where it operates many gas-fired power plants.

RWE doesn't have much renewable capacity outside the West and Australia, but it was looking into offshore wind prospects in Japan, South Korea, and Taiwan alongside plans to grow its trading activities.

Despite the renewable pledge, most of RWE's generation capacity in Europe and Turkey came from gas-fired and lignite coal power plants over the first three quarters of the year.

Nuclear and coal-fired power plants boosted the company's third quarter profits, thanks to high wholesale energy prices and less maintenance on its nuclear power plants. Its lignite coal-fired power plants in Germany recorded the biggest gain of all in meeting higher post-pandemic electricity demand.

But RWE is being forced out of its most profitable segments in Germany as the country plans to phase out nuclear by 2022, following on from the 2011 Fukushima Daiichi disaster in Japan. Germany has pledged to phase out coal by 2038 at the latest.

At the same time, RWE is being pushed to transition by activist investor ENKRAFT, which called for the company to spin off its lignite coal power and grow renewables in a September letter to RWE's CEO Markus Krebber.

RWE said that its German nuclear and coal plants "will lose importance due to exit roadmaps established by the government." It closed three coal power plants in Germany at the end of 2020.

Green hydrogen produced from offshore wind

RWE also announced a new target for 2 GW of owned electrolysis capacity on top of 30 green hydrogen projects it is already building with partners.

Last week, RWE and Shell agreed to look into investing green hydrogen production using offshore wind power in England, amid a flurry of greening announcements coinciding with the COP26 climate summit last week, by energy companies striving to reach internal net-zero targets.

The green hydrogen produced might be sold to the mobility sector in Germany, the Netherlands, and the UK.

RWE is already paired up with Shell and Dutch state-owned gas network operator Gasunie on a green hydrogen production project in German waters.

The AquaVentus project will produce hydrogen from offshore wind farms from the German island of Helgoland. It is linked to the AquaDuctus project, a 10-km pipeline that could potentially offer green hydrogen transport to several countries in northern Europe.

Other RWE projects include the German hydrogen pipeline project GET H2, and the Dutch project to produce hydrogen from offshore wind, NortH2.

UK offshore wind growth

In the UK, RWE is looking to grow its offshore wind capacity after securing the rights to build 3 GW of offshore wind capacity at a state auction in February.

It reached a final investment decision on the 1.4 GW Sofia wind farm in the UK North Sea off the North East coast of England the following month.

The company then increased its stake in the existing 400 MW Rampion offshore wind farm off the South coast of England from 30.1% to 50.1% in April.

Nevertheless, RWE's UK plans offshore wind capacity plans remain dwarfed by its gas-fired power capacity plans.

RWE won gas-fired power subsidies in a UK auction tendered in March, amounting to 6.5 GW of mostly gas-fired power.

It currently has 7 GW of gas-fired power plant capacity generating 10% of the UK's electricity, but it is mulling using blue hydrogen and CCS to decarbonize its gas-fired power plants through the Shell deal.

Posted 17 November 2021 by Cristina Brooks, Senior Journalist, Climate and Sustainability

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