The group, Europe’s biggest polluter thanks to its extensive
use of lignite, or brown coal, said quarterly earnings before
interest, tax, depreciation and amortisation (EBITDA) fell 3
percent to 3.04 billion euros ($3.95 billion), hit by sluggish
energy prices and falling margins in power generation.

That was just ahead of analysts’ average forecast of 3.02
billion euros, and RWE confirmed its expectation for EBITDA of
about 9 billion euros this year.

Gas contracts have been a major problem for European
utilities which are being squeezed as they buy gas under
long-term deals concluded with companies such as Gazprom
and Statoil when prices were firmer, while
having to sell it to customers at lower prices.

Following the renegotiation of some gas contracts, RWE’s
Supply & Trading unit narrowed its operating loss to 47 million
euros in the first quarter, compared with 220 million last year.

The group confirmed it still expects to strike a deal with
Gazprom by mid-year, which Chief Financial Officer Bernhard
Guenther said would result in a “significant” financial effect
for the group.

“We forecast a 300 million euros compensation payment,” said
RBC Capital Markets analyst John Musk.

RWE declined to put a figure on the expected benefit.

Along with its peers E.ON and EnBW, RWE
is suffering from falling wholesale power prices in Europe, its
core market, due to weaker appetite for energy on the
recession-hit continent and energy savings measures.

The International Energy Agency (IEA) expects primary energy
demand in the European Union to decline by 2 percent in the
2010-2015 period, compared with a 10 percent rise globally.

Prices have also come under pressure from the massive
expansion of renewable energy in Germany, as energy from solar
and wind sources takes priority in being fed into the
electricity grid, reducing the hours gas plants can run and
hurting the profitability of conventional power plants.

To streamline their businesses, German utilities have been
shedding non-core assets worth billions of euros. This includes
RWE’s oil and gas exploration and production unit DEA
, which it said was not expected to be sold this year.

RWE has felt relatively little impact from Germany’s
decision to completely pull out of nuclear power by 2022, as
only 13.5 percent of its power comes from the source. That
compares with more than a fifth at its main peer E.ON.

RWE’s exposure to profitable lignite, or brown coal, has
boosted its earnings vis-a-vis E.ON. RWE gets more than a third
of its power from the highly polluting material, compared with
E.ON’s 6 percent.

Guenther said RWE emitted 2.7 percent less CO2 in the first
quarter, partly due to the closure of old brown coal generation
units at the end of 2012. But he declined to forecast CO2 output
for full 2013.

At 1030 GMT, RWE’s shares were little changed at 27.525
euros.

($1 = 0.7705 euros)

(Editing by Harro ten Wolde and Stephen Coates; Editing by Mark
Potter)

Huge European subsidies for solar power helped create
hundreds of start-ups building solar equipment. Those subsidies
are being phased out faster than expected, while greater
competition within Europe and the United States as well as from
China have pushed down prices and forced panel manufacturers to
the wall.

“It’s a storm that’s even worse than feared, hitting
everyone unable to lower costs fast enough,” said Bjoern Glueck,
fund manager at wealth management firm Lupus Alpha, adding any
firms that could not withstand the pressure were next in line.

Since its all-time high in December 2007, the FTSE 50
cleantech index of the world’s largest renewable
energy groups is down 56 percent.

The rout has been broad. Data from research firm IHS shows
the number of companies making solar hardware – such as the
silicon used in solar cells, the individual energy-producing
cells themselves or the arrays of connected cells that form a
solar panel – has plunged to 150 from 750 three years ago.

Global revenue is expected to fall this year to $75 billion,
down from $94 billion euros in 2011.

But paradoxically, the fall in prices for panels which has
hurt manufacturers has helped sustain demand despite the
withdrawal of subsidies, meaning companies such as those that
install household solar equipment have continued to thrive.

Companies that assemble panels have been hit particularly
badly, as their products are much easier to replicate than those
of other firms involved in the industry, such as firms that
produce the polysilicon material used to make cells, or
manufacturers of inverters, devices that are used to hook panels
to the grid.

China’s top panel maker Suntech put its main
manufacturing unit Wuxi Suntech into insolvency proceedings in
March, following Germany’s Q-Cells, which filed for
insolvency last year and was then bought by South Korea’s Hanwha
.

Even large and wealthy conglomerates like Germany’s Siemens
and Bosch, have pulled out of solar,
pointing to the severe crisis that has gripped the industry for
years.

SolarWorld, once Germany’s largest solar panel
maker and long immune to the global industry woes, is also
struggling to strike a debt restructuring deal with creditors.
Sources say such a deal could hand ownership of the firm to
hedge funds and Qatar.

MORE DAMAGE AHEAD

The new proposed tariffs on Chinese solar imports could
backfire on Europe. China, the world’s No.2 solar market behind
Germany in 2012, is expected to become the biggest market this
year, according to industry association EPIA, and Asia as a
whole could also overtake Europe.

Western solar panel maker have long been at odds with their
Chinese counterparts, accusing them of receiving credit lines to
offer modules cheaply in Europe while protecting their own
market, where European companies have made little headway.

European panel makers can little afford to be frozen out of
the growing Chinese market.

China has already threatened in the past to put punitive
tariffs on EU exports of solar-grade polysilicon, a move that
would hit companies such as Germany’s Wacker Chemie,
the world’s No.2 maker of the material.

“This situation is weighing on the market,” the group’s
Chief Executive Rudolf Staudigl said earlier this week.

CAPACITY BOOM

Yet despite the bloodbath among companies in the
manufacturing sector, solar capacity is being sold and installed
at record rates. There are still good reasons to invest in
panels themselves, if not in the companies which make them.

Europe is still aiming to make 20 percent of its energy from
renewables by 2020, from about 13 percent in 2011.

This year, the volume of installed panels around the world
is expected to rise at least 12.5 percent to more than 35
gigawatts, according to data from electronics consultancy IMS
Research. That is still only equivalent to about 0.2 percent of
global electricity production.

“The conflicting trend of growing PV (photovoltaic)
installation volumes accompanied on the other hand by falling
revenues will challenge solar companies to continue to reduce
their cost structures,” said Ash Sharma, director of solar
research at IMS parent firm IHS.

According to GTM Research, a green tech analysis firm, solar
panel production costs are expected to fall to $0.42 per watt by
2015, from $1.29 per watt in 2009.

Cost cuts are putting solar power further along the road to
“grid parity” – the ultimate goal of making it cheaper to
install solar power than to buy conventional electricity from
the grid.

Solar companies have launched cost cutting programmes,
ranging from job cuts and factory closures to reducing of
investment into research and development.

The remaining production costs include polysilicon, the main
raw material for the industry, which is produced by groups
including Wacker Chemie and Hemlock Semiconductor, a joint
venture between Dow Corning, Shin-Etsu Handotai
and Mitsubishi Materials.

The solar panel glut and consolidation is reminiscent of the
computer chip industry, which suffered massive price drops as
Asian manufacturers took on U.S. and European incumbents.

The problems for solar equipment manufacturers have been
exacerbated by feasting on subsidies, only to see them taken
away as the market has taken off.

With costs still higher than coal or natural gas, demand for
solar power has been spurred by rules that subsidise payments to
those who generate power and feed it into the grid – so called
feed-in tariffs. But those subsidies have been withdrawn faster
than expected. In Germany, the biggest market, subsidies have
been cut by more than half in the last four years.

While companies that manufacture solar panels have been
losing out, the price of equipment has fallen fast enough to
keep demand strong despite the lower subsidies. Those who
installed solar equipment in Germany in a few years ago are
still earning returns on investment of about 15 percent.

More than a fifth of new European solar capacity last year
was in private households, good news for hundreds of small and
mid-sized companies that install it.

“That part of the market has done well in the past and
continues to do so,” said Thorsten Preugschas, CEO of German
firm Soventix which helps home owners choose solar systems.

East Germany was a huge user of brown coal, or lignite, and
Germany remains the world’s biggest producer, but its use poses
a problem for Berlin’s environmental plans.

Limiting brown coal use is politically difficult, however,
with 20,000 mining and utilities jobs involved and any move that
could raise already high energy bills for consumers a risky
gambit ahead of federal elections in September.

Coal also remains important to profits at utilities such as
RWE and the German arm of Sweden’s Vattenfall
.

“Lignite load factors have remained high and gross margins
held up better than for other fuels,” JP Morgan analyst Vincent
de Blic said.

RWE mines its own lignite and relied on it for 36 percent of
its electricity production last year.

Coal helped RWE’s power generation unit to a 14.1 percent
rise in profits and prompted the company to add more as it
started output at a 2.1 gigawatt twin-unit lignite-powered plant
in Neurath near Cologne.

Despite Germany’s green energy drive, which subsidises
renewable wind and solar energy and aims to drop nuclear power,
the country mined 5.1 percent more brown coal in 2012, industry
association Debriv data showed.

Brown coal-fired plants also produced 6 percent more power,
the 159 billion kilowatt hours (kWh) accounting for 25.7 percent
of Germany’s power production, industry figures showed.

Germany needs nuclear, coal or gas for so-called base power
to ensure steady supply alongside volatile wind and solar
energy.

And it is coal that is winning out because German utilities
can turn a profit using it to generate electricity, something
they are failing to do with gas.

“Gas-fired capacity is being crowded out by wind and solar
and, paradoxically, by coal-fired capacity,” E.ON Chief
Executive Johannes Teyssen said last month.

E.ON, Germany’s biggest utility, is less exposed to coal
than RWE, however, using lignite to fire just 6 percent of its
generation last year. The German arm of Vattenfall relied on it
for 31 percent of its power.

DARK OR SPARK?

While brown coal mining grows, Germany by 2018 plans to
phase out mining hard black coal, which provides around 20
percent of the country’s power using mostly imported supplies.

Power generators currently can earn more than 10 euros per
MWh for benchmark 2014 power derived from hard coal
while using gas means making a loss of almost 14 euros per MWh
.

Using cheaper lignite is even more profitable at more than
20 euros per MWh, according to Morgan Stanley and JP Morgan
analysts.

Current low prices for permits which utilities and
manufacturers must purchase to offset their carbon output is
also buying “dirty” utilities more time.

Yet Germany’s environmental targets will eventually require
it to rein in brown coal – which has a CO2 intensity of 1,153
grams per kWh versus 428 grams for natural gas, according to
figures from the OekoInstitut, Germany’s institute of applied
ecology.

RWE’s Neurath and Niederaussem lignite power stations are
the second and third largest CO2-emitting installations in the
European Union.

While Germany’s carbon output held steady in 2012 helped by
improved energy efficiency, its broader emissions (of gases
monitored under the Kyoto Protocol) rose 1.6 percent partly due
to pollution from brown coal.

Analysts say one possibility is that Germany might introduce
a tax aimed at ensuring those cashing in on lignite help fund
the country’s 550 billion euro ($715 billion) shift to low
carbon energy.

“The greatest risk following this year’s elections in
Germany could be an increase in the nuclear fuel tax and a new
tax on lignite,” said Kepler Capital Markets analyst Ingo
Becker, adding such a move would likely hit the share prices of
utilities such as RWE.

($1 = 0.7689 euros)

(Editing by Jason Neely)

The purchase of RWE AG’s Net4Gas unit is the
latest in a string of acquisitions in the field of power and gas
grids, which are attracting pension funds and insurers due the
promise of steady returns amid low bond yields and volatile
equities.

It is also one of a series of asset disposals by RWE,
burdened by debt and pressured by Germany’s decision to quit
nuclear energy.

Allianz, together with Canada’s Borealis, beat two
privately held Czech groups – EPH and KKCG – which had been seen
as favourites in the race for the firm, which transports mainly
Russian gas for customers in the Czech Republic and western
Europe, mainly Germany.

“With the sale to Allianz and Borealis … we have succeeded
to find a very reliable long-term investor for Net4Gas,” RWE
Chief Executive Peter Terium said on Thursday.

A Czech government official said earlier this week the
central European country would welcome stable western investors
such as Allianz and Borealis in the country’s gas transportation
network.

Sources familiar with the talks had told Reuters on
Wednesday that Allianz and Borealis were close to signing a deal
to buy Net4Gas.

An RWE spokeswoman said the 1.6 billion euro price tag
included about 400 million euros in debt, which put the cash
element of the deal at close to 1.2 billion.

EUROPEAN PORTFOLIO

Allianz said it and Borealis – the infrastructure investment
arm of the Ontario Municipal Employees Retirement System (OMERS)
- will each own 50 percent of Net4Gas.

Borealis Infrastructure President and CEO Michael Rolland
said the deal expanded a European portfolio which already
included investments in Associated British Ports and other
assets.

Other financial investors, including Australia’s Macquarie
and German reinsurer Munich Re, have also
started to invest in regulated infrastructure assets, including
gas and power grids, and other deals are possible in the sector.

People familiar with the matter said French gas and power
group GDF Suez could sell a stake in its gas transport
unit GRTgaz to reduce debt, while German gas firm VNG
is planning to sell its gas transmission system operator Ontras.

In another deal in the sector, more in line with a
regulatory crackdown in eastern Europe on gas firms and
increasing government control, Hungary signed a deal on Thursday
to buy local gas units of Germany’s E.ON.

Net4Gas operates more than 3,600 km of pipelines – including
links from Russia via Slovakia and the Nordstream pipeline – and
employs more than 500.

RWE expects the transaction to close in the second half of
the year.

Burdened by 33 billion euros of debt and Germany’s decision
to exit nuclear energy, RWE is selling billions of euros in
assets, including its oil and gas exploration unit DEA
.
($1 = 0.7824 euros)
($1 = 0.7788 euros)

(Addtional reporting by Jan Korselt and Jonathan Gould; Writing
by Jan Lopatka; Editing by Maria Sheahan and David Holmes)

The world’s largest maker of solar inverters – a key
component in solar installations needed to feed solar power into
the electricity grid – on Wednesday reported a 58-percent drop
in 2012 operating earnings to 102 million euros ($131 million).

Analysts had on average expected an operating profit of 122
million euros.

Asian rivals that are selling cells and modules at cheaper
prices have caused a profit crunch in the solar industry,
forcing several Western solar players to drop out of the market.

“The competition risks have increased in comparison to the
previous year,” SMA Solar said, adding sustained lower prices
from competitors could “severely impair” its business.

The crisis has even reached some Chinese players, with
Suntech’s Wuxi unit in insolvency proceedings, and is
slowly reaching other parts of the industry, including SMA’s
solar inverters.

SMA has previously said that about 40 percent of the global
inverter market is held by 300-400 small players, of which more
than 200 are Asian.

The crisis has filtered through to SMA’s operating margin,
which plummeted from about 27 percent in 2010 to 7 percent last
year.

The group reiterated it could not rule out an operating loss
this year, as well as its forecast that sales were likely to
fall from 1.46 billion euros in 2012 to between 0.9 billion
euros and 1.3 billion euros this year.

Its shares were indicated 2.5 percent lower in pre-market
trade.

“It shouldn’t be a surprise since the whole solar industry
is sick,” a trader said.

The pressure on margins also saw German engineer Siemens
as well as manufacturing conglomerate Bosch
recently end their ventures in the solar industry.

A 60-minute drive south of Berlin and home to about 125 people, Feldheim is Germany’s first and only energy self-sufficient village and attracts both international energy experts and politicians.

“We’re seen as pioneers and the world wants to know whether they can duplicate our success,” said Joachim Gebauer, a 55-year-old former teacher who guides visitors through the remote hamlet.

“No coal or gas is burned here, it’s all clean.”

Instead, Feldheim is powered by a mix of 43 wind turbines, a woodchip-fired heating plant and a biogas plant that uses cattle and pig slurry as well as maize silage.

Local energy costs of 16.6 euro cents per kilowatt hour (kWh) are just a little more than half of the 27-30 cents Germans pay on average, according to the New Energies Forum Feldheim, an information center.

Feldheim’s rates are not far off those in Poland, which generates nearly all its electricity from carbon-intensive coal-fired plants.

Households there paid on average 14 cents per kWh in 2012, while those in the Czech Republic, which relies on nuclear for about a third of its power generation, paid about 15 cents per kWh.

The Feldheim project is just one small part of sweeping changes in energy across Germany aimed at moving away from coal and nuclear power.

The country of more than 80 million aims to derive 80 percent of its energy from renewable sources by 2050.

It has bolstered wind and solar energy generation and following Japan’s Fukushima disaster in 2011 Germany announced that it will phase out nuclear power by 2022.

Yet at an estimated cost of 550 billion euros ($709 billion) through 2050, Germany’s energy transformation is an immensely costly challenge.

HOW IT WORKS

Last year alone German consumers paid an extra 17 billion euros for energy, including subsidies used to foster renewable energy generation.

Feldheim’s low energy bills also reflect subsidies and other help.

To get started, all homeowners in Feldheim had to agree to pay 3,000 euros in connection fees for new power and gas lines, cutting their links to the regional grid provided by German utility E.ON.

The village then received 850,000 euros in European Union and government subsidies to help cover the 2.2-million-euro cost of new pipelines.

Local power firm Energiequelle agreed to install most of Feldheim’s wind turbines and in return sells excess power they generate on the market.

The local agricultural cooperative helped by agreeing to use about 350 hectares of land to plant corn for the biogas plant.

Officials acknowledge all of this backing underscores why Feldheim may not be a model that works for large cities around the world, or even across the country.

“You can’t do it the same way everywhere in Germany,” German Environment Minister Peter Altmaier said during a visit here. “But I believe it can be a role model for many rural communities.”

Feldheim is part of the small town of Treuenbrietzen, which was first mentioned in a historic document in the year 1208.

Tour guide Gebauer said that part of the project’s success was rooted in a willingness among villagers to help each other out.

“In Feldheim, people stick together,” said 41-year-old resident Peggy Kappert.

A handful of other communities around the world are also aiming for energy independence.

Abu Dhabi’s Masdar City project, designed to be the world’s first carbon-neutral, zero-waste city, is among the most prominent.

Yet its opening set for 2019 has been delayed until 2025, and officials have conceded it may need some help from external energy sources.

Charles Whall, a fund manager at asset manager Investec, said Germany’s own 2050 renewables target was technically possible but could also prove difficult due to high costs and the need for back-up generation capacity to offset swings in renewable energy supply.

(Additional reporting by Michael Kahn in Prague; editing by Jason Neely)

Prices of polysilicon, a key ingredient needed to make solar
cells, plunged 47 percent last year due to global oversupply
triggered by years of government incentives in Germany and other
countries to encourage consumers to shift to solar energy. Those
incentives are now being scaled back.

Wacker Chemie said on Thursday that earnings before
interest, tax, depreciation and amortisation (EBITDA) totalled
787 million euros ($1 billion) for 2012, down 29 percent from
the previous year, and said they would fall again this year.

“The solar sector continues to be dominated by production
overcapacity and price pressures at each supply chain stage,”
Chief Executive Rudolf Staudigl said after the results
announcement.

However, he said polysilicon prices remained at levels seen
in the fourth quarter of 2012, suggesting the market may be
stabilising.

The company said it would propose a dividend of 0.60 euros
per share for 2012, down from 2.20 euros for 2011, although
higher than the 0.52 euros forecast in a Reuters poll.

Its shares, which have risen by a quarter this year after
the company said demand for polysilicon had picked up, were down
1.1 percent by 1305 GMT after the results, underperforming a 0.5
percent rise in the German midcap index.

Oversupply has also led to bankruptcies among solar cell and
panel makers. That has hurt Wacker Chemie as those manufacturers
are the main customers of its polysilicon unit, which accounted
for more than half of the group’s 2012 core earnings.

“We believe the polysilicon market has changed fundamentally
but is cyclical and probably at the bottom of its cycle,” Citi
analyst Andrew Benson said.

TRADE DISPUTE

Wacker Chemie said it expects sales this year to remain on a
par with the 4.63 billion euros seen last year.

Analysts expect EBITDA to fall to 756 million euros in 2013
on sales of 4.75 billion euros, according to Thomson Reuters
Starmine data.

The solar industry has been hit hard in the past three years
as governments have radically scaled back subsidies to the
industry.

Plunging polysilicon prices last year forced Hemlock
Semiconductor, the world’s largest polysilicon maker, and
Norway’s Renewable Energy Corp to review production
plans, reduce working hours or cut jobs.

Hemlock Semiconductor is a joint venture between Dow Corning
, Shin-Etsu Handotai and Mitsubishi
Materials.

Other peers, including South Korea’s OCI Co Ltd
and China’s GCL-Poly Energy Holdings, were also hit.

Western polysilicon makers have also come under pressure
from a trade dispute with China launching anti-dumping
investigations against European solar-grade polysilicon
exporters.

The utility, hit by Germany’s decision to pull out of
nuclear power, stagnating energy demand in Europe and high
borrowings, plans to offload up to 20 billion euros worth of
operations, including non-core nuclear businesses.

It has sold assets worth about 17 billion euros so far and
at the end of December had debt of 35.9 billion euros.

E.ON and peer RWE each hold a third of Urenco
while the Netherlands and Britain share the remaining stake in
the company, which enriches uranium into nuclear fuel sold to
power stations.

E.ON’s Chief Financial Officer Marcus Schenck put the book
value of the company’s stake at a “high double digit million
euro amount”.

Market estimates of the value of the whole of Urenco differ
widely between 2.5 billion euros and 10 billion euros ($3.3-13
billion),

Germany’s top utility also said it was planning to close the
sale of its regional units E.ON Westfalen Weser and E.ON Mitte
in either 2013 or 2014, adding that the three transactions would
have a total value of more than 2 billion euros.

STAGNATING DEMAND

Faced with lacklustre demand and low power prices, European
utilities are being forced to close down loss-making power
plants built before the recession and stagnating population
growth put a damper on energy consumption in Europe.

Total primary energy demand in the European Union is
expected to decline by 2 percent in 2010-2015, the International
Energy Agency (IEA) estimates, compared with a 10 percent rise
globally.

Germany’s nuclear exit as well as pricey gas contracts -
forcing the group to pay for gas at higher price that it can
sell it for – pushed E.ON deep into the red in 2011, when it
posted a net loss of 2.22 billion euros.

Through successful contract negotiations with suppliers and
the absence of charges last year, the group swung to a net
profit of 2.22 billion euros in 2012.

“E.ON has come back to profit, which is good news. Nice
profits usually suggest a healthy dividend,” a Frankfurt-based
trader said.

E.ON confirmed it would propose a dividend of 1.10 euros per
share for 2012.

At 1600 GMT, shares in the group were down 0.2 percent.

A major conundrum with solar panels has always been how to
keep the lights on when the sun isn’t shining.

Solar batteries allow homes and businesses to store solar
power to use in the hours of darkness and can also help to
create “smart grids” that react to sudden power swings and free
stored energy when needed.

The technology is still expensive and not widely used but
with energy bills soaring for consumers, it could quickly gain
market share and reduce dependence on utilities, which are
already struggling with overcapacity and weak demand.

Italy has some of the highest power prices in Europe and is
looking at how to cut costs to allow its businesses to compete.

Nicola Cosciani, head of energy storage at Italy’s top
industrial battery maker Fiamm, says heavy power users like
cement and steel makers are looking at generating and storing
their own solar power – and even selling excess power from their
batteries on to the grid.

“Germany and Italy will be explosive markets for residential
storage and big energy users are also starting to show an
interest. This is a game changer,” he told Reuters.

By 2020, the EU aims to get 20 percent of its energy from
renewables. That compares to 12.5 percent of the EU energy mix
in 2010 and 8.1 percent in 2004, according to most recent EU
statistics. Batteries will be crucial in reaching this target.

In Germany, the world’s largest solar market and Europe’s
largest energy consumer, about 40 percent of all modules sold
have been installed in homes, directly hitting demand for power
from E.ON and RWE.

A four-person household can cut the amount of power it uses
from the grid by 30 percent per year if it uses solar panels and
another 30 percent if it uses a solar battery, leaving it to buy
only 40 percent of supplies from utilities.

With power bills rising and solar subsidies and battery
prices falling, power storage is expected to expand dramatically
within the next 2-4 years.

PRICE FALLS

Solar batteries look like a large car battery and are
usually installed in the basement of a house, hooked up to a
solar panel outside and on to the grid with an inverter.

That allows the batteries to charge up and store excess
energy during the day and release it in the evening. They can
also release surplus energy on to the grid.

The kit is still expensive but the price of solar panels has
already dropped two thirds in the last two years and the price
of batteries is expected to halve in the next few years.

A single solar battery costs about 800 euros per kilowatt
hour (kWh), so an average 6kWh battery costs about 5,000 euros
($6,500).

Including installation, tax and components to connect it to
the grid, an average household – which consumes 3,500 kWh per
year – would pay about 10,000-20,000 euros per storage system.

“We believe that lithium batteries will be available for
400-500 euros per kilowatt hour (kWh) in a few years, featuring
a lifespan of 20 years,” said Martin Rothert, product manager at
SMA Solar, Germany’s largest solar company.

Solar batteries use either lead-acid or lithium-ion.

Germany plans to support the installation of solar batteries
with at least 50 million euros in credit lines which will also
support a greater roll-out.

Italian energy consultant BIP said the battery market will
reach at least 9,000 megawatts (MW) of capacity by 2020 from
today’s 270 MW.

“Due to rising supply and awareness, we expect several tens
of thousands of these systems to be sold in Germany this year,”
said Norbert Hahn, board member at IBC Solar.

Batteries are also needed to develop smart grids, which
adjust power supply to satisfy demand across the network.

Seeing the writing on the wall for traditional generation
and distribution, Italian utility Enel has done a deal with
Japan’s NEC – one of the world’s leading energy storage
system makers – to roll out new generation smart grids.

Developing smart grids can help cut costs and allow
independent renewable energy providers to sell their power into
the grid. Renewable energy, once capital costs are amortised, is
cheaper and more secure.

“The idea is to apply the same principles of the Internet to
electricity networks – any device hooked up can send and receive
content,” said Ugo Govigli, vice president for European smart
grid solutions for NEC Italia.

RWE had previously said it only wanted to sell parts of the
unit, called DEA, which accounted for 23 percent of the group’s
operating profit in 2012.

“The planned disposal would be in line with RWE AG’s
strategic repositioning. It would also take considerable
pressure off future capital expenditure and therefore make an
essential contribution to improving RWE’s financial headroom,”
RWE, which has net debt of 33 billion euros, said on Tuesday.

Analysts have in the past put a price tag of about 4.6
billion euros on DEA.

RWE initially planned to sell assets worth up to 7 billion
euros by the end of this year, but the group said on Tuesday
this would likely take longer because it could not get adequate
prices for its assets.

German top utilities RWE, E.ON and EnBW are
recovering from the country’s decision to pull out of nuclear
energy by 2022, a move triggered by the nuclear disaster at the
Fukushima plant in Japan.

RWE posted a stronger-than-expected rise in 2012 core
profit, boosted by its profitable fleet of lignite plants that
give it a key advantage over main peer E.ON.

The group’s earnings before interest, tax, depreciation and
amortisation (EBITDA) reached 9.31 billion euros ($12.1
billion), beating the 8.69 billion average forecast in a Reuters
poll of banks and brokerages.

Lignite, or brown coal, plants accounted for more than a
third of RWE’s power generation in 2012, benefiting from a big
decline in the price of emission permits that increased their
profitability.

At E.ON, lignite only accounted for 6 percent of the
company’s owned generation in the January-September period.

RWE also kept its outlook for 2013 EBITDA of about 9 billion
euros, compared with analysts’ consensus forecast for 8.84
billion euros.

At 0830 GMT, RWE shares were up 4.5 percent at 29.965 euros.

The stock has lost 29 percent since Germany announced the
nuclear exit in mid-2011, against a 35 percent drop in E.ON’s
shares. These falls compare with a 20-percent drop in the
pan-European benchmark utility index.

DEA’s production in 2011 was 5.1 million cubic metres in oil
equivalents. The unit is active in countries including Egypt,
Norway and Libya and Britain.

Analysts have said big European energy groups like Total
, GDF Suez, ENI and Repsol
are likely to be interested in assets in Egypt, Libya and
Algeria, keen to expand their upstream operations following the
Arab Spring uprisings.

RWE is currently valued at 7.1 times 12-month forward
earnings, cheaper than the 10.3 average of Europe’s largest
utilities, according to Thomson Reuters StarMine.

($1 = 0.7687 euros)

(Editing by Mark Potter)