Friday, January 18, 2013

Electrical grid news from Germany

I am not a patient person.  I have been accused of having extraordinary patience because I built complicated things as a child.  "Oh, you must really be patient," folks would say when I showed them the flying model airplanes or radio (or whatever) I had built.  Actually, the key to building complicated things is persistence.  Patience has almost nothing to do with it—it simply cannot because I have nearly none.  Of all the things that trigger my impatience, the #1 is watching people make the same mistake over and over.  And I really become impatient with people who keep making the same mistakes because of some irrelevant belief set.

The great tragedy of the debates between individualism and collectivism is that we allowed the extreme nutjobs to control the debate.  In places like USA, we are told that collective action like governments building infrastructure or organizing medicine is the first step on the road to serfdom (Hayek).  The Marxist states actually validated this crazy paranoia by collectivizing millions of economic decisions that actually are best left to the individual.  In truth, this was a fight over nothing more than the best way to screw things up.  In a well-run society, collective needs (like a reliable supply of energy) should be collectively addressed while individual needs (like who can best run the neighborhood eatery) should be left to individuals.

After the fall of the Berlin Wall, neoliberalism triumphed world-wide.  These extremists taught that everything—even such obvious organs of collective action such as municipal water supplies—had to be privatized.  And in large part they were.  Now Germany, which has privatized electrical distribution, discovers it REALLY needs a new grid.  And a member of Merkel's right-wing government is suggesting that this grid upgrade will best happen if it is nationalized.

What this means is that someone has come to their senses and admitted that when it comes to real-world problems, pragmatism offers far better solutions than ideology.  We can only hope that neoliberalism soon disappears into the same historical hole that Communism fell into in 1989.  Because problems like climate change are FAR too serious to allow ideological nutjobs to control the arguments.

Of course, just because some German politician has made a public move back to the center does not mean the mechanisms of neoliberalism are dead.  And so we see that the Japanese company Mitsubishi wants to invest in this partially nationalized electrical grid.

Power Play

Politician Calls for Nationalization of Electricity Grid


Germany urgently needs to expand and update its power grid to meet its goal of phasing out nuclear energy and going green, but development appears to have short circuited. A member of Chancellor Angela Merkel's cabinet is calling for a radical change: the partial nationalization of the grid.

A member of German Chancellor Angela Merkel's cabinet is calling for a radical solution to the desperately needed expansion of high-voltage power lines across the country, a critical infrastructure project that has stalled in recent months. Ilse Aigner would like to see the partial nationalization of the country's electricity grid in order to ensure that massive power lines required to transport green energy from offshore windfarms and other sources to the industry-heavy regions of southern Germany are finally built.

The consumer protection minister, a member of the Christian Social Union, the Bavarian sister party to Merkel's conservative Christian Democratic Union (CDU), seems to have struck a chord with the call, too. Many experts in business and politics believe that Germany would be better off with a national power grid that is partially or even fully owned by the government -- especially at a time when the German electricity market will have to be completely revamped because of the Energiewende , Berlin's policy of phasing out all nuclear power plants by 2022 and ensuring that 80 percent of the country's electricity supply comes from clean energy by 2050.

It would also constitute the correction of what many consider to have been a historic mistake: the sale in recent years of power grids owned by the major energy companies like RWE, Vattenfall and E.On. Those divestitures have contributed to an atmosphere that has made it extremely difficult to create the national grid needed to implement the government's new policy, passed in the wake of the Fukushima catastrophe.

Aigner's initiative, which the CSU, the Bavarian sister party to Merkel's Christian Democratic Union, voted to support last week at a closed meeting in the spa town of Wildbad Kreuth, throws the government even more off-course in its clumsy handling of the Energiewende. The minister is playing into the hands of the opposition Social Democrats and their Green Party allies, who have long called for government control of the German power grid.

Shortly before Christmas, Aigner wrote a letter seeking the support of Germany's vice chancellor, Economics Minister Philipp Rösler of the business-friendly Free Democratic Party, also a junior partner in Merkel's coalition government. In it, she demanded that he support "the federal government's entry into the grid operators' market" -- in other words, a partial nationalization of Germany's power lines.

A "strong government partner" could "provide security" in connecting offshore wind farms to the German power grid, she wrote. The proposal has been floating around for some time, she noted, adding that he should examine it "again, and thoroughly." Voters, Aigner reminded Rösler, don't understand why they should pay higher electricity prices to cover the risks of the federal government's shift away from nuclear power and toward green energy, while grid operators are raking in "a high, guaranteed return on their equity."

Rösler never replied to the letter, and only said in an interview that he totally disapproved of Aigner's idea.

But both Aigner and the political opposition in Berlin have strong arguments, given the dramatic nature of the situation. For the Energiewende to succeed, Germany's grid will have to be expanded and rebuilt in record time.

Green Energy Needs to Find Its Way to the Grid

In the future, a large share of electricity in Germany will no longer be generated in power plants near major metropolitan areas. Instead, the electricity will come from solar and biogas plants, as well as offshore wind farms, mostly in the North Sea and Baltic Sea. The goal is to generate clean, green energy and supply it to large parts of the country. The only problem is that the German electricity grid isn't ready to be connected to the wind farms and transport energy to southern Germany.

According to the current plans approved by the federal government, in the coming years the four grid operators in Germany are to build 1,550 kilometers (963 miles) of high-voltage power lines, including several direct-current transmission lines from north to south. At the same time, dozens of wind farms will have to be connected to the terrestrial power grid through new underwater cables that will cost billions to install. These measures, say the environment and economics ministers, as well as industry representatives, must be "tackled immediately" if the prestigiousEnergiewende project is to succeed within the foreseeable future. But the steps taken to date are nothing short of paltry.

Of the lines that have been planned for years, less than 250 kilometers have actually been built. The project has become bogged down, especially in the critical northern region, although on Wednesday, Japan's Mitsubishi announced it would invest $765 million to help one grid operator, Holland's TenneT, connect offshore wind farms to the power grid.

Financing Difficulties for Private Firms

Financing of such projects has been difficult for companies because the risk is too high for banks and insurance companies, which would normally fund such projects, despite the federal government's extensive loan and liability guarantees.

Some are asking why the country doesn't implement a much bigger solution, one that involves a German national grid operator? In contrast to many neighboring European Union countries, Germany's most important high-voltage cables belong to companies, in which insurance companies, banks, capital funds and foreign operators, like TenneT, are calling the shots.

High-ranking executives like former RWE CEO Jürgen Grossmann warned the federal government against a sell-off of valuable infrastructure that took place in recent years. At the time, says Oliver Krischer, the Green Party's energy policy spokesman, the chance to establish a German national grid company was carelessly wasted.

Calls for Creation of National Grid Company

According to Krischer, the offshore business and individual, costly power lines create a new opportunity to build the core of such an organization. Other companies could also gradually incorporate their infrastructure into this national grid company, receiving shares in return.

There is broad support for such a national grid company. For instance, Norbert Römer, the SPD's parliamentary leader in the western state of North Rhine-Westphalia, is calling for a "national grid company with public investment." Even the power companies, normally strictly opposed to government intervention, are apparently not opposed to a public stake.

Executives at E.on, for example, say that combining infrastructure in this way would have many advantages. Today there are four grid zones with different line prices and individual control stations and control centers. If the companies were combined, both administrative costs and electricity prices could be reduced.

Felix Matthes, an electricity expert with the Institute for Applied Ecology, based in the southwestern city of Freiburg, advocates a step-by-step model. First, he says, a company could be established for the three new high-voltage lines and to connect the offshore wind farms to the grid. The current grid operators would be the majority owners and the KfW banking group, a government-owned development bank, would serve as minority shareholder. The federal government would gradually increase its share. A newly formed government agency could assume control of operations and planning.

Researchers with ties to industry also believe that a national grid company could be beneficial. Stephan Kohler, head of the German Energy Agency (DENA), feels that current conditions are in need of improvement. But, he adds, a nationwide grid operator would not necessarily have to be government-owned, but could also belong to private investors. "The government would have to get the ball rolling, though," says Kohler.

'Power Grid VEB'

Federal Network Agency President Homann can also envision a grid company operating direct-current transmission lines. "This doesn't necessarily mean that the government has to be involved," he says. "In fact, it's much more worthwhile to actively continue developing the idea of citizen participation in the power grids of the future."

Homann supports an initiative by Environment Minister Peter Altmaier, which is jokingly referred to in his ministry as the "Power Grid VEB," a reference to VEBs, the publicly owned industrial enterprises in the former East Germany. Under the plan, the operators would issue bonds to finance the new power lines, which any citizen could buy.

He is currently putting his ideas into more concrete terms. The assumption, says Altmaier, a member of Merkel's CDU party, is that at least 10 percent of the sum needed for grid expansion, could be made available for bonds. "With a guaranteed return of up to 5 percent, this ought to be a very attractive investment opportunity," says Altmaier, who is opposed to the nationalization of power grids.

If citizens have to put up with the crackle of his new high-voltage lines behind their properties, the reasoning goes, at least they should be able to derive some financial benefit from the plan.

At the moment, there is nothing Altmaier and his fellow cabinet members fear more than the wrath of the people, especially over the steadily climbing cost of electricity.

The minister already envisions a catastrophe of cosmic proportions should the Energiewende fail. If the grids in the north and south are not successfully synchronized, he says, there will eventually be a big explosion somewhere in the middle of Germany.

That explosion, Altmaier predicts, "will be visible on the moon and audible on Mars." more


Japan's Mitsubishi to invest in German green energy grid

16 JAN 2013

Japan's industrial conglomerate Mitsubishi will buy a stake in a joint venture set up to connect German offshore wind farms to the electricity grid. The deal is a sign of mounting foreign interest in German green energy.

Mitsubishi Corporation's financial investment division would buy a 49-percent stake in the joint venture, with 51 percent to be held by German-Dutch grid operator Tennet, German newspaper Frankfurter Allgemeine Zeitung reported Wednesday.

Mitsubishi would invest 576 million euros ($765 million) in building four underwater connections to German offshore wind farms in the North Sea, Tennet Chief Executive Lex Hartmann told the newspaper, adding that relevant contracts were signed in Japan on Tuesday.

"Mitsubishi's participation is a first step, and a strong signal that we'll succeed in finding more capital partners," Hartmann said, as he estimated total building costs for the connections to come in at 2.9 billion euros, with some 60 percent of that amount to be financed through credits.

Offshore wind farms are a key element in Germany's drive to put energy production on a more sustainable footing. In 2012, new solar power installations, for example, hit a record high as capacity grew by 7.6 gigawatts.

However, government plans to boost offshore wind power to 12 gigawatts over the next 10 years appear elusive in the face of mounting bottlenecks in the German electricity grid. Therefore, recent legislation has made consumers pay more for electricity to finance green energy developments, which appears to be raising the interest of big financial investors.

Despite better investment conditions, Tennet CEO Hartmann said he was skeptical about the government's expansion plans for offshore wind power. Many in the sector regarded an increase of 7 gigawatts in the next decade more realistic than the government's target of 12 gigawatts, he told Frankfurter Allgemeine Zeitung.  more


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