Fears of German yellow vests?

Could Germany be holding back its climate ambitions due to fears of public unrest similar to the gilet jaunes movement in France? 

This week’s pod addresses such concerns with Germany’s leading green energy supplier, and how the EU’s biggest economy can hasten its energy transition.

Host: 

• Richard Sverrisson, Editor-in-Chief Europe, Montel. 

Guest:

• Nils Kompe, Head of power portfolio management, LichtBlick. 

Transcript

Richard Sverrisson, Editor-in-Chief Europe, Montel: 0:04

Hello listeners and welcome to the Montel Weekly podcast, bring you energy matters in an informal setting. I'm Richard Sverrisson, and joining me today is Nils Kompe, who is head of Power Portfolio Management at LichtBlick. One of Germany's most prominent, or dare I say, number one, green supplier of energy. Welcome to Neils. It's a pleasure to have you here.

Nils Kompe, Head of power portfolio management, LichtBlick: 0:25

Hi Richard. Nice to be here.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 0:26

Neils, could you tell us a little bit first about LichtBlick what, what you do and more about your, your plans going forward?

Nils Kompe, Head of power portfolio management, LichtBlick: 0:33

Yeah, of course. Blick is, as you said, an an energy provider, and we are, we are happy to be number one in that active in the German markets. Since 19 19 8. So we started with a market liberalization within the German market. With, with some others. And yeah, built up in that way. A, a new market segment we power for, for end customers. And we now are currently have about 500,000 private customers. We do deliver with green power and approximately 70,000 business customers, which we do deliver with green power. Besides that, we have a. Established some more, some more fields. So we are also active within the gas segment where we have different sustainable solutions. We offer different range of e mobility solutions. And also, yes, some digital software solutions, which we summed up under Schwa.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 1:26

Okay. So is the demand for green energy, I mean we hear about Germany, is the big sort of growth is the engine of, of the energy transition in a way, in some respects anyway, in terms of green power expansion. But what about the demand? On for, for such, you know, for green energy, whether it be power or gas in Germany, is that still growing or has it sort of waned off a bit?

Nils Kompe, Head of power portfolio management, LichtBlick: 1:47

It was on hold in recent years, maybe, maybe up to the summer of last year. And there are things changed due to the climate debate, which started then also as we in Germany had an extra ordinary hot summer. Mm-hmm. And, uh, to that, the greater debates. Started and the Fridays for future debate, which is, which is widespread. The Greater Thunberg, greater Thunberg, which is widespread over over Germany. And we see it also, not only in our contract numbers, but also in recent polls we have made that the need for green power supply is, is growing on on a fast. Pace in the moment. And of course we ask ourself how sustainable this is. But we are quite lucky on that, that the topic of being delivered with sustainable energy is, is on the agenda again. Mm. As it had been also in Germany with the nuclear, nuclear debate and obviously two thousands.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:42

So this is the nuclear phase out and debate. So this is also providing another driver. Driving customers towards you then and you as an established player, you know, are in a good position.

Nils Kompe, Head of power portfolio management, LichtBlick: 2:54

Yeah, exactly. So we see that especially the, the common player in the market or the ecological pioneers as, as is, was profits most from, from this movement as other does. But on the other side, to be honest, the green power product itself, it spread all about every supplier in the moment in the market. So as we started, only a dozen green energy suppliers were. Offering green products. And I think now I do not know any supplier who does not have a green product. So the competition on those customers is getting tougher and tighter.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 3:26

So it's quite fierce competition. Yeah. I mean, if we could talk a little bit about the policy environment in Germany. Um, you know, I, I see you know that they've recently signed off a climate package. They're determined to exit coal by 2038. How do you see this? This, this developing in Germany. What's your view on this? Is it going to slowly, too fast? Definitely too

Nils Kompe, Head of power portfolio management, LichtBlick: 3:46

slowly Because it's always reacting on, on social movements or social needs we see in the moment. So for example, the climate package, which is more, uh, which are various points. Summed up in a, in a kind of climate package, what, what is missing there is the kind of an idea behind that. So we see a lot of extra spending, a lot of extra taxes on that, but there's no, no connecting idea between all these single measures. So my personal feeling in the, in the moment is that the government is kind of overacting or just tries to set up some, some laws. To, to calm the social needs and the social movement, uh, environmental movement.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 4:28

So it's a very reactive, rather than a proactive step in, in determining, you know, ambitious climate goals.'cause do you think then, then the power of the coal lobby or the people who are, you know, the, the big. Fossil fuel generator. Is that, is that too strong then, do you think?

Nils Kompe, Head of power portfolio management, LichtBlick: 4:43

I'm wondering from from which this, I call it fear comes from because the, the non ambitious climate package is one because everybody in the, in the politician itself for sure also do know that. With this package, it's not possible to reach climate goals in 2030 where we need really more ambitious cuts and really more ambitious measures. I personally assume that it's a fear of, of the voters and because debate we have in the moment is that they fear the yellow jackets. Okay. Swapping from France to to Germany, and there is a widespread fear between the current coalition, between the conservatives and the socialist party that we will have a. Similar movement if we, if we take too heavy climate measures,

Richard Sverrisson, Editor-in-Chief Europe, Montel: 5:30

if the policies become too ambitious was 2030. Exactly. Exactly. So what would you like to see then the policy makers in Berlin doing?

Nils Kompe, Head of power portfolio management, LichtBlick: 5:37

I would like to see an, an idea of. What we want to reach in 2030. And that has to be the primary risk goals. And it has to be an ambitious plan. And this has to be, in my opinion, connected within, within social idea of how to organize that in way of, of taxes, in way of, of refunding money from, from polluters to, to consumers. So there are, I think the lobbying groups and the politic groups are producing a lot of reports. How to organize social and ambitious environmental policy, though there are a lot, a lot of ideas in the market how to organize that. But what is missing is a courage and maybe this is the demand. We need somebody who brave enough takes action and yeah, our hope is that maybe within the next coalition or yeah, will be the green party participated

Richard Sverrisson, Editor-in-Chief Europe, Montel: 6:32

and push at that will be more active in pushing for change and quicker change. So. Germany has missed its 2020 targets. Yeah. And do you think it's likely to miss the 20, 30 targets too? Yeah, of course. As I said, with with

Nils Kompe, Head of power portfolio management, LichtBlick: 6:45

this climate package, it's, it's obviously not realistic to reach any, any 2030 goal, uh, because we have to come down to 55% I think in of our missions. Uh, we had in 1919, and. Yeah, we are in the moment at 36 or 37, already missed the 2020 goal. And to come from, from this level to 55th, it's really more ambitious measures than we undertaken.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 7:10

Even though Germany is the front runner in terms of renewal was, you know, expansion, but it maybe it could be overtaken by, by, by other countries in the, in the coming years in Europe anyway. Let's go back to, you know, more nitty gritty kind of GOs and PPAs, these lovely, so guarantees of origins and power purchase agreements, which are, which are a massive massively important for both renewables, producers, suppliers, yourself, and also for customers and consumers who want to be, who want to be green and, and sustainable. Now how do you see the PPA market developing? We're coming to the end of Renewable act in Germany. You know, the EG as it's called. So what. Do you see PPAs replacing that?

Nils Kompe, Head of power portfolio management, LichtBlick: 7:50

I think they, they're adding it up the IIG because what we see right now in respect to the German market is that the market is developing right now, so it's not been existing before because it was not possible to generate geos from German, from German renewable projects due to the specific setup of the market regulation within the IIG, and it's from a energy supplier. Extremely interesting as we see that now, the qualities from all turbines, which aren't allowed to receive any subsidy anymore, and also from large solar projects, which can be built up to, to current market price levels outstanding of the subsidy regime. And those projects are able to to generate GOs. And for that, it is possible for us as energy supplier to connect. Those projects directly to customers. And this could be our private customer base, but this also could be larger industrials or larger business customers who are seeking for stronger commitment on, on sustainability or energy transition in Germany. And what I believe is that this development could speed up the energy transition from a market perspective strongly. Because what's starting right now within the German market is. It's a debate where the geo quality or the green quality comes from in Germany. It is that way that up to now most of the green quality were delivered from, from Norway hydro plants. And what we see also in the background of the current and environmental or greater tune back debate. We mentioned there's a, a growing awareness of. What do I buy here if I, if I close the green power contract? And there are more and more customers who are interested in direct solutions in that way, that they want to be aware of where they are, be deliver, delivered from, and they prefer, uh, a regional or national

Richard Sverrisson, Editor-in-Chief Europe, Montel: 9:48

solution purchase or the sourcing of Nordic hydro geos in Germany. Is that at all controversial?

Nils Kompe, Head of power portfolio management, LichtBlick: 9:55

Not yet. Not yet.'cause there never have been a debate. We, we know it from, from the Netherland market. Where there had been a, a, I think they named a debate and 10 or eight years ago. And since then, all customers in that market were aware of, oh, I prefer Dutch qualities in respect to, to Nordic, Nordic qualities. And I could imagine that, uh. Similar debate could, could rose up and, uh, could rise up in, in the German market. So the availability

Richard Sverrisson, Editor-in-Chief Europe, Montel: 10:24

of, of those qualities. Sure. How do you find, I mean, what, what does Liquidly do at the moment? How, where do you source your your green power from? I mean, the guarantees of origin in respect to our

Nils Kompe, Head of power portfolio management, LichtBlick: 10:34

private customer, and that is what we can handle because business customers, we cannot say. From which quality he wants to be delivered in the end. But for our private customer base, we deliver them with 100% German hydro, uh, plans. And our aim is to increase the share of wind and solar due to, to PPAs. We, we already have closed and we probably gonna close some more within the next years.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 11:04

And, and both for wind and solar? Yeah. Yeah. Okay. Your, your guarantees of origin strategy. So can you, have you got something, have you got some numbers here, Neils at all that you can say? How, how you know, you say you have some Nordic and some German hydro. How does that split up in terms of tarot hours or,

Nils Kompe, Head of power portfolio management, LichtBlick: 11:21

yeah, of course. Our, our total portfolio we, we deliver in the moment in the German market is about 2.6 terawatt hours. And it's. Nearly 50 50 splitted between private customers and business customers. So we source approximately 1.2 tett of, of German hydro. And the rest is mostly Nordic hydro, but we have some more. Sophisticated solution in that way that approximately 20% of our business customers ask for specialized solutions. Okay. And this could be a client to asset solution that they would prefer to be delivered from a specific power plan. This could be specific amendments from a, from an environmental label. This could be a specific source. And our aim within the business customer sector is. To fulfill every need. Sure. As long as it fits to a general environmental perspective, which the customer has. But to say in general what we see, the majority of business customers still are quite price sensitive. So the price arguments still counts very much. And Nordic

Richard Sverrisson, Editor-in-Chief Europe, Montel: 12:28

Hydro then is cheaper than the German

Nils Kompe, Head of power portfolio management, LichtBlick: 12:30

equipment. Exactly. The Nordic Hydro rose. Still in the JO market is for sure the most, most cheapest option. And many business

Richard Sverrisson, Editor-in-Chief Europe, Montel: 12:37

customers decide for that. Yeah, absolutely. So how, how do you see the customers? I mean, you mentioned, you know, we, we have had Extinction rebellion, Reta, Thunberg, the, you know, from the customer side. There's an increasing pressure to, to go green. So do you see then that the, the customers in Germany want the locally produced wind or locally produced solar is, and is there a premium on top of that that you could potentially charge? Do you think? I would

Nils Kompe, Head of power portfolio management, LichtBlick: 13:04

start with the demand because that's something we, we expect to. To, to gonna be changed within next months and, and years. Uh, because the demand is, and that we also know from, from third bases and thoughts we have made is, is demanding quite, quite fast in the moment and on both sides, private and as well as business customers side. And many business customers also feel the duty of being engaged within, or having more awareness of their sustainability of the total supply chain. Especially if they are in. Yeah. And customer market as close in textile and, and trading. So if they have a direct link to the, to the end customer itself, they have a higher awareness of being sustainable in respect to their total supply chain. But we expect that to, to grow. The demand for green energy. If there's an extra willingness to pay, we going find out in the moment of course, because this is always, this is quite ambivalent as the need for being sustainable is, is growing quite fast. The willingness of. Paying extra for that is lacking behind a little bit, but we are quite optimistic that this is going to develop also with it next, with the next

Richard Sverrisson, Editor-in-Chief Europe, Montel: 14:18

month for sure. But, and, and as you said, it's a very competitive environment. Exactly. Yeah. You know, you mentioned the industrial or you know, or industry or industrial consumers, um, in Germany. As part of the eeg, a lot of the, or is it if it's part of the EEG or not, but a lot of the large industrial, uh, companies or clients get compensated for the carbon elements of their power price. And that, do you think, and that's holding back maybe or restricting, um, them going out and finding PPAs or signing PPAs. Do you see this changing? Or, you know, how would you like to see the regulations change, do you think? Do you know, is that likely as well that they could be changed?

Nils Kompe, Head of power portfolio management, LichtBlick: 14:58

I've heard from, from a colleague who's responsible in, in Berlin for, for politics, uh, that this is a, is indeed a topic. And this is discussed within, within the government in the moment because it's weird that all the industrials and the large industrials off takers we have in the moment aren't engaged for, for that reason. You've mentioned that they have the fear of losing the compensation and they would. Yeah, pay double in the end if they choose to take a green PPA. And this would be an action we expect the government to take, just to enable the industrial and all, all the market power we have in the moment to use that to generate and to be engaged within the end gen energy transition in the German markets. Mm. So this would be quite logical for if only a small, small share of the industrial consumption would be switched to, to a green demand. A long term green demand. This would've been an, had an incredible impact. So this would be for sure, one

Richard Sverrisson, Editor-in-Chief Europe, Montel: 15:58

measure we, we ask for. So for, to have these big indu industrial groups on board in the green transition is crucial. I mean, do you see, for example. You know, tech giants coming in into Germany. Are there, is there interest from them as well in terms of, you know, sourcing green power from Germany? In this sense, what we see in the moment, but I'm

Nils Kompe, Head of power portfolio management, LichtBlick: 16:17

not sure if it's, if it's exactly your, your point that there's a lot of interest on the, on the PPA market mm-hmm. And the, the post IG market. So there are a lot of new players engaged trying to find out where. Their market share in respect to the total supply chain is, from buying assets up to delivering DMA activities, so market access activities or services. And also in respect to the operational maintenance market there a lot, a lot of action. Also, I've heard about some small platforms who try to bring together potential sellers and buyers of PPAs, but this is still on a very early stage. Age. Mm. Um, but yeah, there are indeed a lot of, of market forces at the moment. We see you, we see opening or we see, we see evolving of, of geo's qualities within the market.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 17:10

So it's still quite embryonic in, in that sense, on the large industrial, whether it be tech or industrial. Yeah. There's still a lot of potential Yeah. Out there. Yeah. Is that, that's what I'm, that's what I'm gauging from you here. Uh, Neil. Following on from that, is there anything else that you would like to see change on the regulatory side that would ease, like, you know, that would, that would ease the green transition? Uh, what, what we aim for, or if you had a top list for German government, you know,

Nils Kompe, Head of power portfolio management, LichtBlick: 17:34

we, we have that, and I will start with the, the first one. What we need also respect to the PPPA topic, which I thought is, is crucial for the development of the free go market and the green power market in Germany. We need price security because what we see is with flu. Creating market prices. For example, in respect to the post turbine power plants, we had two years ago when market prices were of a level of 35 to 40 euros per mega hour.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 18:04

On the wholesale markets. Yeah. On

Nils Kompe, Head of power portfolio management, LichtBlick: 18:05

on. Exactly. We had the debate that. All these, the continuing of operation of these plans is not, is not possible due to economic reasons. And this debate faded out in respect to increasing market prices. But what we see is if we are talks with, with different operators, that each operator has specific. Operations cost, and yeah, on the level we see in the moment, realistic in the market. And with every price drop as happens this week, for example, The one or another project would fall out of the possibility of being continued with operations. So what we ask for is a kind of minimum price for RS or a minimum carbon dioxide tax in that way. We just need something from a politic level, which would guarantee a certain level of wholesale market prices. It will help indeed a lot. And from an off-taker perspective, we have a second point because also in respect to new solar projects outstanding of the IIG, we have a kind of legal uncertainty in respect to long running contracts. How long is it allowed to deliver? Customers with power and there the legals already are in discussions a lot on it is a seven year contract. It's a eight year contract to an end customer and business customer or 10 year contract. Still legal or viable. Legal viable. Exactly. And they are about, and that is something where we ask. About that We need in respect to this kind of PPA projects where potential off-takers commit themselves for off taking power for a really long period that we need, in respect to that business model, 100% security from a legal perspective.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 19:56

So more of a sort of price, price floor for certainly for carbon, and then also some clarity or certainty in terms of the legal nature of the contracts. Yeah. Neil, thank you very much. I'm sure there'll be, there's. Be plenty to follow in Germany in the, in the years to come and many changes afoot, I would say. So once again, thank you very much for joining the Monte Weekly podcast, and I look forward to hearing from you again. Thank you. Please follow all the news and the, the latest developments in energy markets on Monte online. You can follow us on social media LinkedIn and Twitter, and please subscribe to us on Spotify and Apple Podcasts. That's all for me. Goodbye.