German energy major RWE has announced plans to cut nearly 10 % of its workforce over the next two years, blaming the boom in renewable energy in Germany and declining demand for conventional power.
The company has confirmed that it is seeking to lay off about 6750 employees between 2014 and 2016, the majority of which will be in Germany, where the government’s wide-ranging Energiewende strategy has driven a surge in investment in renewables.
The demand for conventional power has shrunk as renewable energy capacity has soared, driven by feed-in tariff incentives and a rapid expansion of community-owned energy projects. Energy from renewable sources has absolute priority on the grid, so that demand for fossil fuel power can slump during peak periods of renewable energy generation.
RWE has confirmed that it recorded a 64 per cent drop in profits from conventional power plants between January and September this year compared to the same period in 2012, while the group also made a net loss of €370m in the third quarter of this year, compared to a €296m profit in the same period last year.
"We are really in a critical situation," said Peter Terium, chief executive of RWE in a company video. "You see a real disruptive development in our conventional generation business. Year on year they have significantly reduced their income and numbers on the profit side are just not enough to support the heavy debt we have."
Earlier this year, RWE announced that it would mothball or put on standby 3.1GW of European fossil fuelled power capacity because of the booming renewable energy market, and PeterTerium has stated that the move would be followed by a push to save €1bn over the next four years through further efficiencies. He added that the company was also planning to further adapt to the Energiewende by boosting the company’s roll out of energy efficiency services and decentralised energy systems.
However, he also warned that RWE’s ambitions to invest in wind power, particularly offshore wind, have now, somewhat paradoxically, to be reassessed because of reduced government support for renewable energy technology around Europe as a whole.
His comments come after German Chancellor Angela Merkel announced that the likely new government coalition would seek to slow the expansion of wind power in an attempt to reduce cost pressures on households and businesses.
The Christian Democratic and the Social Democrat coalition has been widely reported as planning to cut Germany’s 2020 offshore wind target to 6.5GW, rising to 15GW in 2030, compared to the previous goal of 10GW, rising to 25GW in 2030.
The reduction is a response to the price spikes experienced in consumers’ energy bills as a result of the government’s clean energy subsidy schemes. Environment minister Peter Altmaier has stated that the planned review of these schemes aims to correct "unrealistic expectations" without altering the government’s long term aim of a transition towards low carbon energy sources, arguing that the goal of the reforms was to make the switch to renewables "more predictable and lastingly affordable".
