CEO of Energy Giant RWE 'The Nuclear Power Chapter Has Come to an End'
Peter Terium takes over as CEO of RWE, Germany's second-largest energy producer, on July 1. In a SPIEGEL interview, he explained why he wants to halt nuclear power plant construction and invest in renewable energy instead.
SPIEGEL: Mr. Terium, has your predecessor Jürgen Grossmann called you today to berate you?
Terium: No, he hasn't. We're on great terms. Otherwise we would never have achieved such an orderly transition in the last 10 months. Why should he berate me?
SPIEGEL: Grossmann, the outgoing CEO of RWE, is the loudest proponent of nuclear energy in Germany. And now, even before you assume your post as chief executive in July, you have announced that RWE is no longer interested in building nuclear power plants. Mr. Grossmann must be fuming, don't you think?
Terium: No. Our decision regarding nuclear energy is a decision made by the entire executive board. The previous position stems from a time before the Fukushima disaster and the financial crisis, and, as a result, we could still afford to make costly investments in new nuclear power plants. Now we're living in a completely different world.
SPIEGEL: Just a minute. The financial crisis began more than four years ago and the Fukushima accident happened in 2011.
Terium: You're forgetting the German government's decision to phase out nuclear energy.
SPIEGEL: But you're going further than that. You aren't just saying goodbye to nuclear energy in Germany, but you also want to stop building nuclear power plants in other countries. Your predecessor wanted to keep that option open.
Terium: The impact of current political decisions and market changes extends far beyond Germany. The large amounts of wind and solar energy that are being fed into the grid, together with the economic crisis, have led to a sharp decline in electricity prices.
SPIEGEL: But consumers in Germany now have to pay more for their electricity.
Terium: Yes, because government levies for new, renewable forms of energy, electricity grids and storage facilities drive up the price of electricity. The price we receive for generating power is currently so low that it's simply irresponsible to build an expensive nuclear power plant in Europe. The nuclear power chapter has come to an end for us.
SPIEGEL: If it doesn't make economic sense to build nuclear power plants in Europe, why are you and other energy providers still suing the German government for a total of 15 billion ($18.7 billion) in damages because of its nuclear power decision?
Terium: It doesn't make sense to build new nuclear power plants. But it's a completely different situation with our existing nuclear power plants. We've invested billions in them. Under current laws, they are absolutely safe and have passed the stress tests. If policymakers have them shut down in the short term for other reasons, they also have to pay for the resulting losses.
SPIEGEL: In addition to the nuclear power plants that were already taken off the grid following the federal government's decision, you still operate plants in Gundremmingen and in the northern German region of Emsland. Will you shut those down as well?
Terium: No. That would be destroying capital. Besides, supply security could not be guaranteed if all nuclear power plants were suddenly shut down.
SPIEGEL: But the nuclear industry has been claiming for years that the lights will go out if plants are shut down. And yet nothing has happened so far. Why should we take this doomsday scenario seriously now?
Terium: The warnings are coming from the Federal Network Agency (ed's note: the German government agency responsible for regulating the energy industry). Things were especially tight last winter. The system was almost brought to its knees during the week of Feb. 9. There was little wind, little sun and we hardly had any reserves. Some oil-fired power plants in Austria had to be connected to the grid to guarantee the security of supply. Shutting down nuclear power plants is initially going to be a step backwards for climate protection.
SPIEGEL: The German government is looking into whether it can force electric utilities to keep old and unprofitable power plants connected to the grid as a backup, so as to guarantee the electricity supply. Would you accept that?
Terium: In principle, this sort of political initiative is fine. However, the affected operators would have to receive suitable compensation for operating these unprofitable backup power plants.
SPIEGEL: Many politicians see RWE as the black sheep of the energy industry. With its brown coal-fired power plants, RWE emits more CO2 than any other company in Europe. Do you feel good about this?
Terium: Yes, because we're one of the biggest investors in renewable energy. Besides, we don't generate electricity just for the fun of it. Our coal-fired power plants are capable of producing the baseload electricity urgently needed by industry, and at acceptable prices. We are very pleased to have them in our portfolio. We also make money with them, which isn't entirely irrelevant.
SPIEGEL: Does this mean that RWE is still investing billions in new coal-fired power plants, making it the biggest "climate killer" in Germany for years to come?
Terium: I think your choice of words is completely inappropriate. We are replacing old, existing plants from the 1950s and 1960s with new, significantly more efficient ones. In doing so, we are reducing the adverse effects on the environment. And perhaps one day we in Germany will be happy that we can rely on a domestic energy source like brown coal, given rising global commodity prices. Environmental protection is a challenge in energy production. But the security of supply is just as important.
SPIEGEL: So far, RWE's business has been based primarily on coal and nuclear power. You've decided to phase out nuclear power, and coal-fired power plants are controversial for environmental reasons. What's the outlook for RWE?
Terium: The picture you paint of RWE is incorrect. RWE has consisted of more than coal and nuclear power for a long time. In 2008, we established RWE Innogy, a subsidiary that's developing the renewable energy business. Now, in 2012, we are the largest investor in onshore wind farms in Germany, and we'll be the first to operate an offshore wind farm in the North Sea.
SPIEGEL: Even capital investors, who are mainly interested in decent returns, are critical of RWE for investing too little in renewable energy. This was the reason that asset manager company Union Investment attacked management at the last shareholders' meeting.
Terium: Of course we would like to invest more in renewable energy, but we can't spend more money than we earn. Last year our bottom line took a hit of 1.3 billion ($1.6 billion), because the federal government decided to phase out nuclear energy. That money is gone. In addition, the rating agencies are demanding a lower debt-to-capital ratio. Our scope for investment is limited.
SPIEGEL: Haven't you also underestimated the difficulties in the construction of offshore wind power plants? The wind farm you are building will be finished a few years later than the energy industry had promised the federal government.
Terium: If you want to reproach us for this, you also have to talk about the conditions under which we work. The first wind farms off the British coast are at water depths of 10 to 15 meters (33 to 50 feet). In Germany, we have to go out past the Wadden Sea and can only starting building at water depths of 30 meters. When building these offshore wind power plants, you don't know what challenges you're going to face. It's an experiment. It's like the first flight to the moon.
SPIEGEL: But you knew these circumstances before it all began. Nevertheless, the energy utilities promised the federal government to build one gigawatt of power generating capacity off Germany's coasts each year. That hasn't happened.
Terium: We do want to achieve this. But there are delays for which we can't be held responsible. The approval processes are dragging on. The suppliers aren't able to deliver quickly enough. There aren't enough special ships for the installation. We've even had two additional ships built because of this problem. You can see how we're fighting to make progress.
SPIEGEL: And now there's another potential problem: The grid connecting the wind farm won't be finished in time.
Terium: In fact, grid operator Tennet has just informed us that there will be further massive delays in connecting our North Sea East offshore wind farm to the grid. This severely jeopardizes the profitability of the wind farm. We are calling on the government to discuss a solution to the problem and economic compensation with us and the other investors. If this doesn't happen, it will no longer be possible to fulfill German offshore wind plans by 2020. And many of the wind farms that were actually planned for Germany will be built in England instead.
SPIEGEL: You are threatening to stop construction?
Terium: No. I'm just pointing out that we are investing billions, and yet the promised grid connections don't exist. This means that we can't produce, can't make money and can't recoup our investments within the anticipated amount of time. As a businessman, I can't answer for that.
SPIEGEL: Aside from the offshore wind farms, the share of renewable energy at RWE is also low. It's currently at 6 percent for Europe but only 3 percent for Germany. Looking at those numbers, you can't claim that RWE was forward-looking and invested in renewable energy.
Terium: Although we got a late start, we have done a huge amount of catching up. We have a clear goal: By 2020, we want renewable energy to constitute 20 percent of total energy production. Our business just happens to be long-term. If it had been easy to predict market development, why didn't five other energy utilities enter the market in a big way?
SPIEGEL: Now RWE wants to invest in solar. Your predecessor Grossmann still rails that generating solar electricity in Germany makes about as much sense as "growing pineapples in Alaska." Why are you entering the pineapple farming business?
Terium: Because the government subsidizes growing pineapples in Germany. As a taxpayer, I can be upset about the fact that it's a waste of money. Spain has twice as many hours of sunshine as Germany. For the same amount of invested capital, twice as much energy could be generated there. As a businessman, all I can say is this: Then let us do something reasonable with it. RWE has 25 percent municipal owners and partners, many of which ask us if we would like to build a solar farm with them. We're pushing this business.
SPIEGEL: Do you believe that the government can stick to its timetable for phasing out nuclear energy, and that Germany will be producing enough green electricity by 2022 to be able to shut down the remaining reactors?
Terium: The goals are ambitious, but we want to contribute to the energy turnaround also being an economic success. The chancellor has now taken the issue of the energy turnaround where it belong: to the Chancellery. Until now, it seemed as if there were not one energy turnaround but 16, because each state was making its own plans. Now Ms Merkel wants to change this. This creates a realistic chance, although the problems are still massive.
SPIEGEL: Where's the snag?
Terium: Look at the issue of the power lines. Every environmental organization can file lawsuits and appeals against the routes, which slows things down considerably.
SPIEGEL: You have no sympathy for concerned citizens?
Terium: No, on the contrary, but you can't have everything when it comes to this issue. If you don't want nuclear power in Germany, at least you have to accept the power lines that we need to transport wind energy. There simply is no other option.
SPIEGEL: In the lobby of the RWE headquarters, where we are sitting, we noticed a slogan. "Engineering must be cruel to assert itself." Is that your RWE motto?
Terium: (laughing) No, that's not our slogan. Personally, I disagree with it completely. It's the view of an artist who has an exhibition here. Artists have to provoke and initiate discussions. As a company, we have to consider and discuss such outside views. It helps us to grow, even if we don't always like the opinions.
SPIEGEL: Mr. Terium, thank you for this interview.
Interview conducted by Frank Dohmen and Dietmar Hawranek
Translated from the German by Christopher Sultan