Fortum and Uniper
We both want to significantly reduce emissions from energy production without jeopardising the security of supply of electricity and heat or raising energy prices unreasonably.
Uniper is a successful, international energy provider and trader, and a great match with Fortum. Uniper’s hydro, nuclear and gas power is needed to realise Europe’s energy transition.
Our goal is to develop a common strategy for Fortum and Uniper by the end of the year 2020. The strategy Uniper published in March 2020 is a good starting point; at its core is phasing out coal in Europe, converting fossil production, growing the gas business, and developing hydrogen and other new solutions. This is very much in alignment with Fortum’s strategy that is strongly weighted to carbon-free energy production. Additionally, we are building significant new business related to the circular economy.
As part of our strategic work, we set concrete and ambitious climate targets.
Good momentum in the transition
Fortum has committed to shared efforts to mitigate climate change. We have a common goal with others who share the climate concern: reducing carbon dioxide emissions and replacing the use of coal. We are working every day towards this in many ways. We invested about 400 million euros in carbon dioxide-free production in 2019 – one hundred million more than in 2018.
With the Uniper investment, Fortum’s share of carbon-free production grows by approximately 60%. Fortum and Uniper are together Europe’s third largest producer of carbon-free electricity.
Uniper – a profitable investment in Europe’s energy future
Production that secures the functionality of society at all times is needed alongside intermittent renewable energy. In the Nordic countries, this need is met with hydro and nuclear power – and Uniper and Fortum both have a lot of it. Uniper owns about 200 hydropower plants with total capacity of 3.6 gigawatts in Sweden and Germany. This capacity exceeds that of all the hydropower plants in Finland combined.
In Central Europe, gas plays a key role, and it too is being made greener all the time. Uniper is a pacesetter in this development work. Fortum shares Uniper’s view that natural gas is needed as a replacement for coal so that delivery reliability can be maintained and emissions can be reduced. Gas also enables added investments in wind and solar energy. Uniper is also developing renewable energy storage solutions, especially hydrogen-based, in which it can utilise its gas expertise and its gas infrastructure.
With Uniper, Fortum’s share of carbon-free production grows by approximately 60%. Coal accounts for about 12% of the combined production of the companies.
Uniper will gradually phase out coal
The share of coal in Fortum’s and Uniper’s production will decrease quickly in the upcoming years. In discontinuing the use of coal, it makes sense to decommission the most polluting power plants first. If the law phasing out German coal power is enacted, Uniper has announced that it will decommission 3,000 MW of old coal capacity, which is three times more than the capacity of the new Datteln 4 power plant. Overall, Uniper’s coal power capacity will be cut in half by the end of 2025, and the company is aiming for its electricity and heat production in Europe to be carbon-neutral in 2035.
The new EU Commission is pursuing carbon neutrality for the European Union by 2050.
Better efficiency = Less emissions
- Due to Datteln 4, older and more polluting coal-fired power plant capacity can be closed.
- During 2020, electricity produced by Datteln 4 has already helped to reduce over 200 000 tons of CO2, compared to an average European coal-fired power plant.
- The efficiency rate of Datteln 4 is approximately 20% higher than average.
Frequently asked questions
Why did Fortum acquire Uniper?
Fortum wants to drive the change towards a cleaner world. Our goal is to enable a carbon-neutral energy system, but change doesn’t happen overnight, it requires persistence. Together, Fortum and Uniper have sufficient size and financial capacity to drive Europe towards carbon neutrality. The strong financial position makes it possible to implement the needed measures to mitigate climate change. We have an aggregate EBITDA of approximately EUR 3 billion
Fortum and Uniper have competencies that are very complementary. Together Fortum and Uniper are in the vanguard in Europe’s energy transition. Alongside intermittent renewable energy, we need the security of supply at all times to ensure the functionality of society. In the Nordic countries, this need is met with hydro and nuclear power – and Uniper and Fortum have a lot of it. In Central Europe, gas plays a key role, and it too must be made green in the longer term. Uniper is a pacesetter in this development work.
In the age of renewable energy, we need flexibility, energy storage options and a balance between supply and demand. Hydrogen meets the requirements for these needs. Uniper is developing hydrogen-based renewable energy storage solutions. In this work, Uniper can utilise its gas expertise and its gas infrastructure.
Of Fortum and Uniper’s combined production, 37% is carbon-free hydro and nuclear power and 49% is gas power. Uniper’s emissions were reduced by 20% in 2019 compared to 2018, and by 35% in the company’s production in Europe. The share of coal accounted for about 1% of Fortum and Uniper’s combined sales in 2019.
Doesn’t Fortum take climate change and people’s climate concerns seriously?
We take climate change very seriously and we are working every day to mitigate it. We invested 401 million euros in carbon dioxide-free production in 2019 – one hundred million more than in 2018. Climate change is a shared challenge. We have a common goal with others who share the climate concern: reducing carbon dioxide emissions and replacing the use of coal.
Why didn't Fortum block the commissioning of the Datteln 4 plant?
Uniper has announced that it is decommissioning three times the amount of old coal-power capacity compared to Datteln 4. In addition, Uniper will close all its coal plants in Great Britain by the end of 2025 and in the Netherlands by 2030 at the latest.
Urgent actions are needed, but, for a functioning society, shutting down all fossil production at once is simply not possible – no matter how much we would like that. Societies are completely dependent on electricity. Even a short power outage has an impact on water intake and wastewater removal. It disrupts the operations of, e.g., hospitals, public transportation, stores, banks and gas stations. In extended power outages, everyday life – water, cooking, and heating of residential, business, and office buildings – would be problematic.
In Germany, for example, coal and nuclear power combined account for 39% of the country’s energy production. Germany had already made the decision to phase out nuclear power by 2022 at the latest, so the country will have to use coal to ensure the security of energy supply. According to the coal phase-out law passed in July, the use of coal will be phased out gradually by the end of 2038. In this situation, it is best to use the newest and most efficient plants, such as Datteln 4.
How do you comment on the newly passed German coal phaseout law?
The German parliament has on July 3, 2020 passed a coal phaseout law. According to the law, the use of hard coal and lignite in energy production will be phased out by the end of 2038 at the latest. In 2019, lignite and hard coal was used to produce approximately 30% of electricity in Germany. The law does not touch upon individual power plants, but rather defines how much coal-based production capacity Germany may have in use during each year. In addition, the law stipulates compensations for energy companies running coal fired power plants as well as for regions affected most by the coal exit. You can read more about the law here.
In our view it is good that the passing of the coal law in Germany has given a clear schedule and rules for the coal exit. Based on the law, German energy companies can now plan their actions and schedules for closing their coal-fired plants.
The EU emissions trade should be maintained as the primary means of steering climate policy, and we want to remind about the necessity to tighten the emission targets defined in it and to expand it to cover new sectors such as heating and cooling of individual real estate. When passing national coal bans and making similar decisions, it is necessary to neutralise their impact on the emissions trade by reducing the amount of issued emissions allowances correspondingly, which Germany has announced it will do. These are, in our view, key prerequisites for reaching EU’s climate targets as cost-efficiently as possible. The goal of the EU is to be climate neutral by 2050.
Will Fortum’s Uniper investment tarnish Finland’s climate reputation?
Fortum wants to be leading the way in the energy sector in enabling the transition towards a carbon-neutral Europe; that also requires systematic work to discontinue coal power. Fortum also supports Europe’s and Finland’s targets to exit coal power. A cleaner world is created by a combination of carbon-free energy production and the smart use of resources.
We are working every day towards this in many ways. We invested 401 million euros in carbon dioxide-free production in 2019 – one hundred million more than in 2018.
Why is Fortum allowing its subsidiary to sue the Dutch Government?
The Netherlands has decided to phase out coal power by 2030. According to last winter’s national court ruling, the Netherlands must additionally reduce its emissions already this year from the previous 20 per cent to 25 per cent (compared to 1990 levels), which could impact the coal-power decommissioning timetable. According to the information Fortum has, the Dutch Government is in discussions with the companies that own coal power in the Netherlands.
Uniper has not sued the Dutch Government. Uniper doesn’t object to the phase out of coal power – the company’s goal is that its European production is carbon neutral by 2035. Uniper wants the Netherlands to comply with the international investment protection agreement. The International Energy Charter Treaty (ECT) protects companies from unilateral regulatory changes. The ECT has been signed by 53 countries, including the Netherlands, and it applies to all energy technologies.
What impact will the Uniper investment have on Fortum’s total emissions?
Fortum produces low-carbon electricity mainly with hydro, nuclear and gas power. With Uniper, Fortum’s share of carbon-free production grows by approximately 60%, and together Fortum and Uniper will become Europe’s third-largest producer of carbon-free electricity. Coal accounts for 12% of Fortum and Uniper’s combined production – and that will decrease in the upcoming years.
If EU emissions trading were functioning, would Datteln 4 be commissioned?
Emissions trading is an EU mechanism for reducing emissions. Companies producing harmful emissions are obliged to hold a certain number of emission allowances equal to their emissions. The companies can then trade the emission allowances with one another.
We call for comprehensive solutions instead of pinpointed ones. Energy production emissions are reduced most effectively through EU-level emissions trading, the tightening of which Fortum has strongly advocated. Well-functioning emissions trading would eliminate the plant- and country-specific decisions, and emissions would be reduced at the lowest possible cost.
At the moment, Europe’s emissions trading not only covers emissions from electricity and district heat production but also emissions from the European industrial sector and air traffic. Limiting the rising global temperature requires measures to reduce emissions in all areas of society. A good way to do this would be to expand the scope of emissions trading, e.g., to transportation and stand-alone heating and cooling of buildings.
Emissions trading has proven its effectiveness. In 2019, the emissions from Europe’s electricity production decreased by about 100 million tonnes – largely as a result of the tripling in the price of emissions allowances. The use of coal power decreased in Europe by close to one quarter in 2019.
Coal power cannot be shut down all at once without widespread power outages. It makes sense to first shut down the most polluting plants. Coal is still needed for now, so it is best to use the newest and more efficient plants.
Why aren’t renewable energy solutions being taken into use on a wider scale?
The transition to a low-carbon and ultimately a carbon-neutral future will take time and significant investments in energy production and transmission infrastructure – power lines and gas pipelines. The transition must be done in such a way that we can secure the supply of energy in all conditions. And costs must be kept affordable for everyone, for industry and services, for cities, transportation and households. At the same time, the transition’s impacts on regional development and employment must be taken into consideration.
What will replace coal use in energy production?
The only way coal use can be discontinued in electricity and heat production is if the production can be replaced with other energy sources. Otherwise, there won’t be enough electricity and heat and the prices will go up. This will require investments not only in renewables, but also in gas, energy storage, and other flexibility solutions to improve the security of supply.
Urgent actions are needed, but, in terms of society, shutting down all fossil production at once is simply not possible – no matter how much we would like that. Companies like Fortum must shoulder their responsibility with affordable energy costs to keep the lights on, households warm, and the wheels of industry turning. A lot of development is also needed for new technologies and investments in tried and true low-carbon production forms as well as in transmission systems – power grids and gas pipelines. To shoulder this responsibility and to do the work, we need financially strong and successful companies, because the task is impossible with public funds.
A controlled transition to low-carbon and carbon-neutral energy gives us time to develop renewable energy and new technologies, like hydrogen technology and the development of gas to minimise emissions. Fortum’s and Uniper’s competencies are complementary in this respect.