Federal government's misconception: "It's really stupid to rely on gas-fired power plants instead of smart meters"

The energy transition is at a crossroads. It is a strain on Germany's competitiveness and cannot guarantee security of supply, says Katherina Reiche. The Minister of Economic Affairs is therefore insisting on gas-fired power plants. There is now talk of up to 72 units. Is this still a sensible adjustment to reduce the costs of the energy transition? Or are renewables being strangled for the benefit of the gas lobby? Philipp Schröder is convinced: Subsidized gas-fired power plants will not solve any problems but will make Germany once again dependent on foreign countries. The head of the energy company 1Komma5Grad has a different suggestion: Those who want to save money should abolish the feed-in tariff for solar systems and forgo large battery storage systems, he says in ntv's "Climate Lab." However, according to him, the key to a successful energy transition is significantly smaller, simpler, and cheaper.

ntv.de: When will you start building gas-fired power plants with 1Komma5Grad?

Philipp Schröder: Never. (laughs)

Why not? It seems like a lucrative business.

The core problem of Germany's electricity supply is the imbalance between renewable production and consumption. The German government seems to believe this problem can only be solved with gas-fired power plants. We are convinced that it would be more cost-effective to shift consumption intelligently and use storage systems or electric vehicles to store excess renewable energy. That's why we hardly need any gas-fired power plants; even five to ten gigawatts would be a stretch.

Robert Habeck, too, was talking about up to 25 gigawatts . Then half of that was supposed to be put out to tender. The CDU/SPD government is now talking about up to 36 gigawatts . Where does so much uncertainty come from?

From the calculation basis: These figures can be compiled as needed. The federal government expects a very slow ramp-up of batteries and electric cars. This results in a greater need for gas-fired power plants. We believe that if every German household had a smart meter, 20 gigawatts of flexibility would arise automatically, because private individuals have already installed 20 gigawatts of batteries. They could cover a large part of the base load—not all of it, because it varies seasonally. But this would not require an investment, as the home storage systems are already paid for. However, they are not allowed to participate in the energy market, as would be necessary.

The black-red coalition has no interest in investing in renewable energies?

There are smart people at the Federal Ministry for Economic Affairs and Energy who understand the challenges. The Federal Network Agency is also doing solid work. But the tariff deal with Donald Trump is increasing the pressure to buy American liquefied natural gas. They have practically promised to invest $750 billion. Katherina Reiche herself has said: LNG will lead to expensive electricity.

Are we stifling the energy transition to make Donald Trump happy?

If you want to shorten it that much, yes. But then we'd not only stifle the energy transition, we'd also fail to reduce electricity costs.

The central promise of the Federal Government …

Correct. I don't see how you can sustainably reduce prices with LNG, because it will always be more expensive than Russian gas.

Katherina Reiche can't do anything about the tariff deal, but she's being cornered and has to make sure she buys this gas - and instead tries to save money elsewhere, like in grid expansion?

The costs are caused by static and arbitrary electricity consumption. If the heat pump runs after the sun has set, grids have to be built to transport other electricity there—whether that's wind power from the coast or imported electricity from our neighbors. The more heat pumps and electric cars there are, the worse it gets. Grid fees will continue to rise. In that sense, Ms. Reiche is right: We subsidize solar power, but generate it when no one needs it. And we pay gas-fired power plants not to run during the day. Ultimately, both power plants are loss-making because the connection between consumption and generation is missing.

Local electricity price signals?

And flexible grid charges, a price signal for the grid. We operate in seven markets; we already have this in Sweden: There, electricity transport is more expensive when the grid is busy and cheaper when it's less busy. Less renewable electricity is curtailed, energy prices are falling, and less grid expansion is needed because less re-dispatching is necessary. This is what's causing rising electricity prices in Germany: The wind turbines have to be shut down because no one can take the electricity. Will this problem be solved if I install more subsidized gas-fired power plants? Not really.

Are we chaining ourselves to high electricity prices in the long term?

Yes. We are currently giving away electricity to Austria and later buying it back from Poland. In a flexible and intelligent system, the cheap electricity is stored or used in every home. If this is implemented, we could massively reduce electricity prices for everyone in Europe and would need far less gas and grid expansion. However, this requires smart meters.

The smart electricity meters?

This is the infrastructural basis; it doesn't require a lot of money. Unfortunately, the Ministry of Economic Affairs doesn't expect them to be installed in time. If that happens, they're right: We need to expand base load with gas-fired power plants, even though we're already seeing days where we cover 100 percent of our electricity needs with renewables. They're there, and they can't be switched off.

Don't overthink it.

I know some people wish that were the case. There's a certain populist tendency to say: The energy transition is terribly expensive. I hope that one day everyone will understand that renewables generate cheap and sometimes even free electricity. The first plants are now also no longer eligible for feed-in tariffs. We would be foolish not to think about how to use them more effectively. But that also includes abolishing dysfunctional regulations and the subsidies for certain plants.

The feed-in tariff?

Correct. At the beginning of the year, the Solar Power Peak Act was passed. Since then, electricity is no longer remunerated if the market price is negative. That makes sense. We also advocated for this disadvantage because there is no way around harmonizing production and consumption if we want to make electricity cheaper for everyone.

Do you also support the proposal by RWE CEO Markus Krebber, who is making a very populist case for reversing the feed-in tariff?

There are always two camps in this debate. Some say renewables are the good guys and fossil fuels are the bad guys. The fossil fuel camp says: They're all just idiots and oat milk drinkers. We have to stop this. Whether it's a gas-fired power plant or a solar system, we shouldn't give money to a technology that does something that raises costs for everyone else. The price risk belongs in the market. We have home storage systems that could absorb the excess solar power. But the process of registering the storage system and the meter with the distribution grid operator for feeding in electricity... those are bureaucratic hurdles, like those encountered during the construction of Berlin Airport.

So, in essence, the RWE boss is right when he says: People should pay when they feed into the grid?

No, that's polemic. New solar systems are barely feeding into the grid anyway. And a company that has extensively optimized subsidies for coal-fired and nuclear power plants should be careful what it wishes for – especially since private individuals have invested their own money in solar installations. But statements like these show that companies like RWE are now daring to come out of hiding again and hit hard. Incidentally, the problem would solve itself if we could sell our solar power directly on the electricity exchange and simultaneously charge our storage systems and electric cars. Then we wouldn't need the feed-in tariff anymore, but we need smart meters for that.

What's wrong? Just look at what our neighbors have done. They're all equipped with smart meters.

Texas is rampantly building wind and solar power, and so are the Chinese. The prices for solar modules and battery cells are falling. It's truly foolish to rely on gas-fired power plants that we don't necessarily need. It's far too expensive; it makes us dependent on foreign countries. Why do they do it anyway? Because otherwise, the gas business model will collapse. The more people switch to heat pumps, the more expensive it becomes to operate the gas grids. The gas lobby is one of the best there is. It has successfully put the cart before the horse. That's the first point.

And the second one?

Nine hundred municipally owned distribution system operators are involved in the smart meter rollout. Some of them are so small and organizationally sluggish, it's a combination of incompetence and obstruction. They have no use installing a smart meter. As monopolists, they've made money from the meter point for decades. The moment we show up with the smart meter, they lose revenue. But the Federal Ministry for Economic Affairs and Energy cannot order the meters to be installed. Only the Federal Network Agency can do that, and it is independent.

Actually. In its report on security of supply, the Federal Network Agency didn't consider batteries. It gives the impression that no expansion is taking place. How do you explain that?

The report's assumptions are too defensive, to put it politely. Private homes have 20 gigawatts of batteries, and the first million electric cars have already been sold. Theoretically, they could also absorb excess electricity; they sit idle for 23 hours a day. This would have a huge impact on reducing the baseload demand on gas-fired power plants. However, the report's criticism is inadmissible when it comes to large-scale storage systems. The Federal Network Agency rightly views them critically.

Why?

They're exploiting a regulatory loophole: Through targeted lobbying, they were exempted from grid fees for 20 years and can trade electricity on the energy market all day long. When prices are low, they store electricity. When they're high, they sell it. Large-scale storage systems, however, don't do this in a way that benefits the grid. They don't pay for the highway and often use it when it's already congested.

These are the infamous feeders that you don't want?

They place additional strain on an already stressed grid without serving any purpose. They just want to make money. That's why the Federal Network Agency and the Ministry of Economics are trying to prevent these capacities by subsidizing construction costs. This is a tactic, because the legal situation can no longer be changed. These large-scale storage facilities are money-printing machines.

Only your storage is good storage?

Sure, I'm biased; we make money with home storage. But our storage systems are grid-friendly and pay grid fees. Our customers are helping to solve a real problem – and benefiting: In the Netherlands, our electricity prices are negative; in Sweden, they range between €0 and €0.05. In Germany, we also manage €0.07 to €0.10.

But are large storage systems also part of the solution or are they completely unnecessary?

The situation is complex. We need large-scale storage, but most projects want to take advantage of the grid fee exemption and make money. Requests from private investors for more than 500 gigawatts aren't just falling out of the blue.

And you can't stipulate that large-scale storage systems must operate in a way that benefits the grid?

The Bundestag passed the exemption from grid fees shortly before the powers were transferred to the Federal Network Agency. This was during Angela Merkel's last coalition government. People probably weren't clear about what this meant. They simply wanted storage. Now it's the law. Grid operators are trying to fend off the applications by saying: If you want a grid connection, you have to contribute to the connection costs. The Federal Network Agency, in particular, knows that large-scale storage will have a negative impact on private consumers and industry.

Is the storage chaos intentional to take the wind out of the applicants' sails?

The Federal Network Agency has a mandate: Network charges must be as low as possible. It's a bit like a central bank. It ensures that Grandma Erna, as well as industry, gets great infrastructure at a fair price. It has to clean up the chaos created by the exemption from network charges.

Can the energy transition still be stopped?

In the short term, I'm nervous because it unsettles customers when standards are changed or even manipulated. In the long term? No, renewables will prevail and be the driving force behind affordable electricity. That's why it will harm Germany if we listen too closely to the gas lobby.

Clara Pfeffer and Christian Herrmann spoke with Philipp Schröder. The conversation has been shortened and edited for clarity. You can listen to the full interview in the "Klima-Labor" podcast.