Investor Group Lunch. London, 12 July 2011 Stefan Judisch, CEO RWE Supply & Trading GmbH

Transcription

1 Investor Group Lunch London, 12 July 211 Stefan Judisch, CEO RWE Supply & Trading GmbH

2 PAGE 2

3 The era of Gemütlichkeit > In Central Europe, the Biedermeier era refers to the middle-class sensibilities of the historical period between 1815, the year of the Congress of Vienna at the end of the Napoleonic Wars, and 188, the year of the European revolutions > Biedermeier can be associated with two phases in early 19th-century German history: The first is the growing urbanisation and industrialisation leading to a new urban middle class, and with it a new kind of audience The second is the growing political oppression following the end of the Napoleonic Wars, prompting people to concentrate on the domestic and the nonpolitical (at least in public). Due to the strict control of publication and official censorship, Biedermeier writers primarily concerned themselves with non-political subjects such as historical fiction and country life. Political discussion was usually confined to the home, in the presence of close friends PAGE 3

4 17 March 211, Germany on the edge of nuclear hysteria You are provisionally arrested! If in a highly developed country like Japan, a country with high safety standards and safety requirements, nuclear consequences from an earthquake and a tsunami can't be prevented, this has consequences for the whole world, it has consequences for Europe and it has consequences for us in Germany. Angela Merkel (German Chancellor) The executive branch cannot override laws. Norbert Lammert (President of the Bundestag) PAGE

5 The German nuke shutdown makes the CWE power markets much more vulnerable to tight supply/demand situations especially in Q Tighter German system The nuke shutdown removed 8.5 GW of baseload nuclear capacity, reducing supply surplus. Delays in new build commissioning For Q3, there were 3 new builds scheduled to come online in Germany. Boxberg (675 MW, lignite) has just been postponed to the beginning of 213. The two other remaining new builds, Walsum 1 (75 MW, hard coal, T2 steel problems) and Neurath G (1,5 MW lignite), also suffer commissioning delays. This will further stress the German power system. Increasing cross border dependency Germany will be more exposed to net imports and thus, weather and availability effects from neighbouring countries. This also means Germany will not be able to mitigate price spikes in the same way as it did before. Even worse, Germany will rather amplify spike risk due to its import requirements. Higher spike potential in tight supply-demand situations Further upside is provided by delays in French nuke revisions or strike actions and cold weather with low wind in Q 211. The stronger dependency on French imports also justifies a higher risk premium due to the steepness of the French stack and the higher weather sensitivity of the southern region of France ( rich Brits and Russians effect ). This leads to higher spike potential in tight supply/demand situations (as in Q 21). Alpine and Nordic hydro situation There is an increasing risk that an Alpine and Nordic hydro deficit as in the first five months of 211 will limit power imports to Germany over the course of this year. PAGE 5

6 1 The nuke shutdown reduced base load nuclear capacity in Germany by 6.3 GW* > Further planned nuke revisions lead to an additional tightening of 6.6 GW** > Volatile wind and solar power production cannot substitute reliable nuke power production Historic and Planned Availability in 211 Historic availability Planned availability 35 3 GW March 211, nuke moratorium Planned revisions of nuke plants E.ON RWE EnBW Lignite Wind Solar * Excludes Brunsbüttel and Krümmel (2 GW in total) as these plants were offline since 27 ** Emsland, Grafenrheinfeld, Grohnde, Gundremmingen B, Philippsburg II PAGE 6

7 2 Compared to 21, there is a significant lack of reliable baseload capacity in Germany for 211 Capacity Change 21 vs 211 Unreliable, volatile supply Delays Reliable, dispatchable generation Installed capacity in GW Wind Solar Planned coal/lignite New CCGT new builds* Mothballed + Nuke** = coal/lignite plants Possible net deficit in reliable generation * Walsum, Boxberg ** Exclusive Brunsbüttel and Krümmel PAGE 7

8 Due to the nuke shutdown Germany becomes a net power importer > Until 17 March, Germany was a net power exporter of ~ 3,8 MW; since the nuke moratorium, Germany imports ~ 1,8 MW power > Power imports from France and the Czech Republic have doubled. In particular, France has become a net power exporter to Germany; after the German nuke moratorium France cannot count on German imports any longer Total German Cross Border Nominations Net exporter Nuke moratorium Net importer Total cross border nomination Average nomination Cross border nomination D>F PAGE 8 Import GW Export GW

9 3 With an increase in power imports, Germany is more exposed to weather and availability effects from abroad > Increased import dependency due to the nuke shutdown, especially towards France as largest swing border > Import of further sensitivity towards French nuclear unavailability in addition to domestic revisions in Germany > Import of further weather sensitivity in addition to large domestic wind, solar and temperature sensitivity French temperature sensitivity Nordic and Alpine hydro sensitivity Net Transfer Capacity in MW 3,5 SWITZERLAND (Winter 21/11) DENMARK WEST 1,5 1,5 EAST SWEDEN 61 GERMANY Import of temperature and nuclear availability sensitivity Import of hydro 2,7 3,2 sensitivity FRANCE Source: Import of hydro sensitivity 2,2 2, AUSTRIA PAGE 9

10 An example: In Q 21, a combination of high load and low nuke plant availability in France resulted in 3 French Temperature (mean) Temperature France was facing a first cold snap in October 21 and an extremely cold December 21, resulting in increasing load (2.3 GW/ C) 5 Nuke production was still reduced due to delays in revisions French Power Production vs Load Profile French load < power production French load > power production Nuclear power production Load profile Total power production PAGE 1 GW C

11 high import requirements of France and What happened? > Strong French power imports from Germany (about 3 GW) Export GW Cross border nominations France Import GW > French power exports to Italy (via CH) dropped to zero or even flipped; France imported power from Italy Nuke moratorium (Germany became net importer of French power) F->D F->I F->CH PAGE 11

12 Spot Price Development Germany, France, Italy Italian GME prices are set by marginal costs of oilfired power stations in tight peak hours /MWh...high French prices, which were coupled to and even exceeded Italian price levels > Power imports from Italy to France caused an increase in prices at Powernext and in extreme cases as in Dec 21 as well at the EEX > After the nuke moratorium, Germany is no longer able to export power to France. French and German prices will link much earlier to the Italian price levels > As a net importer, Germany will be exposed to price spikes in neighbouring countries EEX Phelix Powernext GME PAGE 12

13 Ceteris paribus simulation of EEX hourly spot prices for winter 21/211 in Germany with supply reduced by 6.3 GW recorded monthly average of hourly settlement prices (base) average monthly price with supply reduced by 6.3 GW (base) recorded monthly average of hourly settlement prices (peak) average monthly price with supply reduced by 6.3 GW (peak) /MWh Oct 1 Nov 1 Dec 1 Jan 11 Feb 11 Mar 11 Winter 21/211 PAGE 13

14 Ceteris paribus simulation of EEX hourly spot prices for winter 21/211 in Germany with supply reduced by 6.3 GW for the most expensive day in October 21 (19.1.) /MWh (logarithmic scale) 1, 1, hourly price reduced by -6.3 GW hourly settlement prices hour /MWh (normal scale), 3,5 3, 2,5 2, 1,5 1, 5 hourly price reduced by -6.3 GW hourly settlement prices hour hour EEX price EEX price -6.3 GW price increase in % 35% 31% 31% 3% 31% 32% 9% 88% 211% 515% 8% 632% hour EEX price EEX price -6.3 GW price increase in % 212% 168% 165% 167% 2% 21% 36% 3173% 36% 69% 69% 2% PAGE 1

15 /MWh (logarithmic scale) Ceteris paribus simulation of EEX hourly spot prices for winter 21/211 in Germany with supply reduced by 6.3 GW for the most expensive day in November 21 (1.11.) 1, 1, hourly price reduced by -6.3 GW hourly settlement prices hour /MWh (normal scale), 3,5 3, 2,5 2, 1,5 1, 5 hourly price reduced by -6.3 GW hourly settlement prices hour hour EEX price EEX price -6.3 GW price increase in % 62% 8% 93% 8% 75% 6% 58% 8% 251% 575% 5% 51% hour EEX price EEX price -6.3 GW price increase in % 56% 381% 1316% 852% 16% 351% 3897% 23% 223% 5% % 6% PAGE 15

16 Ceteris paribus simulation of EEX hourly spot prices for winter 21/211 in Germany with supply reduced by 6.3 GW for the most expensive day in December 21 (1.12.) /MWh (logarithmic scale) 1, 1, 1 1 hourly prices reduced by -6.3 GW hourly settlement prices /MWh (normal scale), 3,5 3, 2,5 2, 1,5 1, 5 hourly prices reduced by -6.3 GW hourly settlement prices hour hour hour EEX price EEX price -6.3 GW price increase in % 5% % 3% 3% 6% 2% 58% 1396% 163% 1395% 1915% 138% hour EEX price EEX price -6.3 GW price increase in % 331% 5% 582% 626% 513% 2799% 2873% 1291% 28% 6% 5% 51% PAGE 16

17 /MWh (logarithmic scale) Ceteris paribus simulation of EEX hourly spot prices for winter 21/211 in Germany with supply reduced by 6.3 GW for the most expensive day in January 211 (2.1.) 1, 1, hourly prices reduced by -6.3 GW hourly settlement prices hour /MWh (normal scale), 3,5 3, 2,5 2, 1,5 1, 5 hourly prices reduced by -6.3 GW hourly settlement prices hour hour EEX price EEX price -6.3 GW price increase in % 7% 63% 59% 58% 56% 62% 1% 637% 1983% 2689% 278% 227% hour EEX price EEX price -6.3 GW price increase in % 2599% 277% 1931% 693% 129% 3139% 2871% 2578% 36% 63% 52% 7% PAGE 17

18 Ceteris paribus simulation of EEX hourly spot prices for winter 21/211 in Germany with supply reduced by 6.3 GW for the most expensive day in February 211 (28.2.) 1,, /MWh (logarithmic scale) 1, hourly prices reduced by -6.3 GW hourly settlement prices hour /MWh (normal scale) 3,5 3, 2,5 2, 1,5 1, 5 hourly prices reduced by -6.3 GW hourly settlement prices hour hour EEX price EEX price -6.3 GW price increase in % 6% 53% 5% 58% 55% 53% 2% 1% 339% 328% 2793% 3333% hour EEX price EEX price -6.3 GW price increase in % 2663% 193% 231% 223% 223% 163% 277% 379% 66% 19% 28% 91% PAGE 18

19 /MWh (logarithmic scale) Ceteris paribus simulation of EEX hourly spot prices for winter 21/211 in Germany with supply reduced by 6.3 GW for the most expensive day in March 211 (1.3.) 1, 1, hourly prices reduced by -6.3 GW hourly settlement prices hour /MWh (normal scale), 3,5 3, 2,5 2, 1,5 1, 5 hourly prices reduced by -6.3 GW hourly settlement prices hour hour EEX price EEX price -6.3 GW price increase in % 8% 38% % 7% 6% 6% 372% 999% 23% 166% 15% 3758% hour EEX price EEX price -6.3 GW price increase in % 2153% 259% 1679% 377% 82% 77% 33% 3792% 62% 57% 6% 51% PAGE 19

20 French nuke unavailability in Q 211 could further stress the supply situation > Availability in France for Q 211 looks challenging due to a back loaded revision programme in 211 > Subsequent delays of French nuke revisions together with cold weather conditions will significantly increase the spike potential as Germany will rather amplify than mitigate the spike potential due to the nuke shutdown > In 211, nine 1-year-inspections of nuke power plants leading to a 1-day outage period are planned. This number is three 1-year inspections above the long-term average > Aging French nuclear fleet and possible strike actions could further increase availability problems Unavailable Nuclear Capacity 25 2 actual forecast GW Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 History Max History Avg Foreacst 211 History 21 Oct 11 Nov 11 Dec 11 PAGE 2

21 5 Import of weather sensitivity Alpine and Nordic hydro situation > There is an increasing risk that the an Alpine and Nordic hydro deficit will limit power imports to Germany over the course of this year Reservoir Content for Norway > The Alpine hydro situation was severe in first five months of 211: Bodensee/Lake Constance water levels close to 15-year minimum > The Nordic hydro deficit in first five months of 211 was due to the following reasons: Beginning of snow melt began one month earlier than usual Numbers in % of reservoir capacity Numbers in % of reservoir capacity Low snow pack might lead to flatter seasonal filling shape unless high precipitation amounts in summer fill the gap Median Min. Max. Source: PAGE 21

22 Current developments put further pressure on the CWE power markets Decision to phase out nuclear power by 222 On 3 June 211, the Federal Legislative Body (Bundestag) voted for a shutdown timeframe of all nuke power plants in Germany; the plants provisionally off-line before the vote will now permanently shut down and the remaining 13 GW will be phased out progressively over Capacity in GW March 211 Biblis A Biblis B Brunsbüttel Isar 1 Krümmel Neckarwestheim 1 Philippsburg1 Unterweser Comparison of 29 and Current Shutdown Timeframe End of 215 Grafenrheinfeld End of 217 Gundremmingen B End of 219 Philippsburg 2 End of 221 Grohnde Brokdorf Gundremmingen C End of 222 Isar 2 Neckarwestheim 2 Emsland Shutdown plan December 29 Shutdown plan June 211 Year PAGE 22

23 26 2 PAGE Current developments put further pressure on the CWE power markets Carbon price crash Jan 29 Feb 29 Mar 29 Apr 29 May 29 Jun 29 Jul 29 Aug 29 Sep 29 Oct 29 Nov 29 Dec 29 Jan 21 Feb 21 Mar 21 Apr 21 May 21 Jun 21 Jul 21 Aug 21 Sep 21 Oct 21 Nov 21 Dec 21 Jan 211 Feb 211 Mar 211 Apr 211 May 211 Jun 211 Jul /t Development of Carbon and Power prices German power price base load (212) Carbon price (Dec 212) 18 Carbon price (Dec 212) /MWh /t 1-2 %

24 Current developments put further pressure on the CWE power markets Carbon price crash > Carbon prices fell to lowest level since the recession in 29 within the last four weeks > What are the reasons? Phase 2 (28-212) long, phase 3 (213-22) probably short by its end Supply and demand balance is sensitive to assumptions regarding emissions, banking, CER s, NER* 3, aviation EU is planning to impose new energy efficiency legislation on the same sectors that are included in the ETS. This lowers emissions from these sectors and demand decreases Poland does not intend to restrict the supply of emissions allowances International pressure to exclude airlines from ETS > Currently, carbon prices do not provide an investment signal for renewable technology * New Entrants Reserve PAGE 2

25 Tighter German system With this bridge technology I prefer to get out Delays in new build commissioning Germany needs to guard against a serious tight supply/demand situation in Q 211 with an expected significant increase in power prices Increasing cross border dependency Risk of Alpine and Nordic hydro deficit Higher spike potential in tight supply-demand situations PAGE 25

26 The German power grid regulator is already preparing for a severe supply shortage in Q 211 The decision to exit nuclear power > German power grid regulator is considering several scenarios to stabilise the grid in Q 211 to make up for the nuke shutdown > Scenarios include reactivating idle fossil-fuel power plants or keeping one of the eight reactors taken off the grid in March on standby ( cold reserve ) > Peak demand in Germany may more than double to about 8 GW on a cold day in December may cause major economic damages in winter 211/12 If wind does not blow and the sun does not shine, southern Germany with large industries is most at risk of experiencing grid instabilities. Our storage capacities will be depleted within a few hours and we won t be able to import from France because they need their power themselves. PAGE 26