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E.ON to split

Reuters is reporting that German energy giant EON is to split in two, with its conventional generation assets ending up in a new company, while the renewables and energy efficiency businesses remain under the EON brand.

It is hardly surprising that EON wants to be able to protect its cash-cow renewables operations from the losses its conventional assets are generating - an inevitable consequence of the market having been so thoroughly rigged against them. You can see the logic in the step management have taken. In the short term, management look as though they are going to bet more money on renewables. However, with the Energiewende seeming to lurch from one shambles to another, a change of ministerial sentiment could completely change the energy landscape. It's not hard to imagine a world in which the hived off conventional power stations start to look like attractive assets and the renewables start to look like a collection of dead ducks.

But with the choice between the two businesses being a bet on a minister's whim, it's hard to imagine anyone wanting to invest their money in either.

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Reader Comments (22)

These giant energy companies know what will happen. They will sell (dump) potential loss-making assets (such as offshore wind farms) to pension schemes, investment banks and Governments (such as the UK Green Bank) before investors realise the pokes that contain these pigs. Just hope that none of your assets are invested in any such schemes.

Dec 1, 2014 at 8:50 AM | Registered CommenterPhillip Bratby

"But with the choice between the two businesses being a bet on a minister's whim, it's hard to imagine anyone wanting to invest their money in either."

Hmm - not sure about the whim bit here. EOn operate in the eu market and as far as I can see there is no backing off from renewables in eu policy.

Dec 1, 2014 at 8:54 AM | Unregistered Commenternot banned yet

Unfortunately, this was always predicted by professional engineers. The 'virtual power station' idea, a pan Europe network of windmills, was always doomed to failure. I told FoE people this in 2001. By 2004 the Danes were forced to dump >10% instantaneous demand wind power to Nordic hydro, buying back the power at spot market prices.

In 2012 we had David MacKay, who has learnt by experience, a rare event for pseudo-science warmists, reportedly writing to new boss, Davey, that Diesel STOR plus windmills saves no fossil fuel.

As idiot Davey flies off into his sunset in Lima, ready to meet his constituency Maker, we may be getting from Cameron a realistic energy strategy run by engineers which will actually save oodles of fossil fuel AND make the windmills work for a living instead of being a combination of the make-work Windmill in 'Animal Farm', the Easter Island Statue cult, political hubris, and the new EU Swastika with three blades instead of four.......

Dec 1, 2014 at 9:05 AM | Unregistered CommenterNCC 1701E

NCC 1701E

a realistic energy strategy run by engineers is unlikely to include any wind turbines.

Dec 1, 2014 at 9:15 AM | Unregistered CommenterGraeme No.3

Hi No 3! Unfortunately we have the windmills and because of Alstholm's troubles, we are unlikely to be able to buy new central nukes. Therefore we need 5 nukes' worth of power from gas, with manageable solar integrated into the package, which also allows the windmills to work in their 12 year lifetime (6 for offshore).

There is a way to do this via the equivalent of the WWII Aircraft construction programme. The alternative is for the inner cities to die, which is what the crony capitalists behind renewables want to happen - see 'Population Matters', formerly the 'Optimum Population Trust'.

Dec 1, 2014 at 9:29 AM | Unregistered CommenterNCC 1701E

NCC 1701E: Ed Davey made yet another disastrous mistake in going for the Areva (not Alsthom) EPR for Hinkley, when he should have considered it along with the other two much better designs, the AP1000 of Westinghouse and the ABWR of Hitachi-GE.

Dec 1, 2014 at 9:45 AM | Registered CommenterPhillip Bratby


There sounds like an interesting story there about you explaining things to FoE back in 2001. Are you able to elaborate?

Dec 1, 2014 at 9:54 AM | Registered CommenterBishop Hill

Mea Culpa: Areva instead of Altsholm.

With crony capitalism look for cui bono: his brother?

Dec 1, 2014 at 9:54 AM | Unregistered CommenterNCC 1701E

@BH: I was on the way to the HoC to hear a speech by Psychology and History graduate, Lord David Sainsbury, then Labour's Science Minister, and was met by a lobbying group of FoE who were trying to sell the Windmill Virtual Power Station.

As a renewable and conventional energy old hand, I discussed this with an earnest young man and his two older, female minders. My comment was 'don't be so stupid, it can never work - if you want a working power system with no CO2 emissions, you might get 15% wind with dumping the excess to Hydro or Pump Storage, but the rest would have to be nuclear'.

At this point the two Harpies literally dragged the male away, presumably for re-education, because I was convincing him that I could cut the mustard. I was considered a few years' later as CEO of the largest UK Energy Consultancy to take on the task of marrying windmills to the grid, but because of extraneous factors, did not take the job. If I had, we would not have had idiots Miliband, Huhne and Davey getting away with impoverishing the poor for no CO2 saving.

Bottom Line: FoE knew in 2001 that their plan could never work, but decided to keep at it for political purposes.

Dec 1, 2014 at 10:25 AM | Unregistered CommenterNCC 1701E

NCC, see two recent posts by Planning Engineer @ Climate Etc, for matchmaking a marriage of zebra and carriage.

Dec 1, 2014 at 11:55 AM | Unregistered Commenterkim

Offshore windmills have a lifetime of 6 years? Scroby Sands is 10 years old already. Vindeby is 22 years old.

Philip B
Designs that exist only on paper always look great. So did the EPR did before they started to actually build it and find the flaws.

Don't put so much faith in engineers. The IMechE and various other engineering faculties and institutes are still as eco-barmy as all the rest.

Dec 1, 2014 at 12:04 PM | Unregistered CommenterJamesG

Construction of offshore renewables up until 2020 could create a maximum £288m of
offshore wind decommissioning liabilities based upon decommissioning costs of
£40,000/MW and 7.2 GW of installed Round Two capacity. If decommissioning is
included also from currently operating/under construction Round One projects, this
would add an additional liability of £12 million, based upon decommissioning costs of
£40,000/MW and 300 MW of installed Round One capacity. Finally if all consented
Round One is included in the calculation the magnitude of decommissioning costs
increases to £335 million.

Offshore Renewable Energy
Installation Decommissioning

Dec 1, 2014 at 1:00 PM | Unregistered CommenterMartyn

'Don't put so much faith in engineers. The IMechE and various other engineering faculties and institutes are still as eco-barmy as all the rest..'

As a retired Member of the IMechE, I wholeheartedly agree with you. A recent survey asked Members (I never got asked) if the Climate Change Act should be scrapped; 28% said Yes; 60% said No. I put this astonishing result down to more youthful members, many of whom not only work in 'renewables', but have been brought up to receive the 'global warming' thing as wisdom.

However - perhaps a glimmer of hope - over the last few issues of Professional Engineering I have noticed a gradual reduction in the number of 'climate change-related' features...

Dec 1, 2014 at 1:37 PM | Unregistered Commentersherlock1

On the subject of the Energiewende, did you see this in the current Private Eye? (p9)

"KEEPING THE LIGHTS ON With the general election looming, coalition energy policy is closed for new business. After the election, however, someone really will need to get to grips with the incoherent mix of “renewable” goals and “market reforms” that are current UK energy policy. They may be emboldened by some plain speaking now coming from across the North Sea. Taking wind and solar power further and faster than any other major economy, Germany now finds itself in the worst of all worlds: electricity prices for consumers among the highest in Europe and rising strongly; the grid system ever more unreliable; and emissions of CO2 actually rising.

In a remarkable outburst Sigmar Gabriel, number two in Angela Merkel’s “grand coalition”, has decided enough is enough. The leader of the Social Democratic party (SPD), who also holds the posts of federal vice-chancellor and minister for economic affairs and energy, roundly declared that Germany’s emissions targets cannot be met; that energy policy is putting its basic industries at risk; that it is not possible to phase out coal-fired power generation on the planned timetable; and that new targets will not be set.

The UK is a few years behind Germany in deploying renewable energy but is starting to face the same issues: cost, grid unreliability and difficulties in accommodating intermittent wind power generation. - Old Sparky"

Dec 1, 2014 at 1:50 PM | Unregistered CommenterPopeye

Sounds like a winning decision. A further erosion in conventional economics by government policy takes from the conventional share value, but increases the non-conventional share value. And vice-versa: if the disasterous Green policies die, conventional will improve.

The split will also allow investment funds with different agendas and/or mandates and/or risk assessments to direct their funds appropriately. When we recall that investments are not made for their current situation (excluding purely short-term dividend considerations), but for their perceived longer term improvements, buying in low with the conventionals is smart for those who think the non-conventionals are inherently unviable, and buying in now with the non-conventionals is smart for those who think Green subsidies will only increase (which includes subsidies for non-production as conventional sources are increased as the need to guarantee power levels is recognized, thereby making non-conventionals unnecessary more often).

Dec 1, 2014 at 5:27 PM | Unregistered CommenterDoug Proctor

Vindeby was comissioned in 1991. Offshore: yes, but in only 5 metres of water. Anyone know how well it's doing? As usual with windfarms there's never any production data; wonder why?

Dec 1, 2014 at 7:25 PM | Unregistered CommenterCapell

It is hardly surprising that EON wants to be able to protect its cash-cow renewables operations from the losses its conventional assets are generating - an inevitable consequence of the market having been so thoroughly rigged against them.

Equally, they may be looking to quarantine their conventional assets from the impending failure of their renewables operations ... an inevitable consequence of the market having been so thoroughly rigged with subsidies. ;-)

Dec 2, 2014 at 2:59 AM | Unregistered CommenterStreetcred

The worry is the renewables nonsense continues under the EON brand name. This signals that Eco stupidity is here to stay!

Dec 2, 2014 at 6:47 AM | Unregistered CommenterFarleyR

I think I'm off on my own tangent here, but I did find an analysis of Danish offshore wind farm perfromance over the years:

The report is by Milborrow, a keen supporter of the wind industry. He doesn't find much fall-off in performance with time. However, many of the schemes analysed seem to have 'trophy' status and there are hints that maintenance has been 'generous'. And there's also this neat throw away:

"The chart suggests that, over a 20 year period, the capacity factor at Tunø Knob may increase by about 1 percentage point; at Copenhagen it decreases by about 2 percentage points and at Vindeby it decreases by about 3 percentage points.

But those figures do not present the whole picture. As average wind speeds vary from year to year, a number of authorities have developed "wind indices" that provide a measure of the wind strength in any year, relative to a long-term mean. The Danish Wind Index, developed by Danish consultancy EMD International, has been established for many years and is a typical — and well-respected — parameter. The productivity of wind turbines during a windy year is likely to be higher than in a calmer year, and so the index provides a way of normalising such data. If the wind index is used to correct the data, then it emerges that the apparent degradation in performance is, in fact, mainly due to the somewhat lower winds in recent years"

My study of winds in northern Europe does not support that suggestion. In fact, 2011 and 2012 were bumper wind years in Esbjerg, Billund and Roskilde.

Dec 2, 2014 at 8:38 AM | Unregistered CommenterCapell

You put your finger on it. We either get wildly optimistic or wildly pessimistic analyses of windmills. It would be nice to get something we can trust.

Btw we are facing quite a bit of decommisioning costs from the nuclear industry. By contrast, beyond maybe taking the blades off, i can't see why windmill farms need decommisioned.

Dec 2, 2014 at 12:59 PM | Unregistered CommenterJamesG

The ungreen part that E.ON wants to get rid of will also hold the financial reserves dedicated to nuclear decommission and waste treatment/deposition.
These financial reserves however are held in the form of E.ON's assets - the very ungreen power plant assets the Energiewende policy renounces and thus devalues ...

This is going to be interesting.

Dec 5, 2014 at 1:34 PM | Unregistered CommenterWolfgang Flamme

There's no denying it nuclear is the most cost efficient form of energy production, however obviously its the least renewable. Dont know how many billions it would cost to generate as much energy as one nuclear power station from wind turbines, a lot I bet though!

Feb 23, 2015 at 2:56 PM | Unregistered CommenterEon number

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