Volkswagen to extend coal-fired power as Russia concerns persist

Covering an area of ​​6.5 million square meters, VW’s huge manufacturing plant in Wolfsburg uses two cogeneration plants to supply it with heat and electricity.

Krisztian Bocsi | Bloomberg | Getty Images

The Volkswagen CEO told CNBC on Wednesday that the German auto giant is keeping its options open in terms of powering its huge manufacturing plant in Wolfsburg, admitting that coal will still be needed due to ongoing tensions between Russia and Russia. and Europe.

Speaking to CNBC’s Annette Weisbach, VW chief Herbert Diess was asked how concerned he was about the shutdown of gas supplies from Russia and what that would mean for his company’s operations. company.

“It’s actually really a threat…because it’s very hard to predict what’s going to happen,” Diess said. “Here in Wolfsburg, we still have coal-fired power plants that we wanted – and are in the process of – converting to gas. »

Covering an area of ​​6.5 million square meters, VW’s manufacturing plant in the city of Wolfsburg uses two cogeneration plants that supply it with heat and electricity.

The company had planned to replace its coal-fired boilers with gas and steam turbines in a bid to reduce carbon dioxide emissions, but world events appear to have prompted a rethink for the time being.

“Everything is ready but now we are hesitating a bit, and we will watch and see how the situation develops,” said Diess. ” We can [adapt] … to the situation. We can, [for] a bit, extending our coal-fired power plants – I hope it’s not too long. Then we would like to switch to gas once the supply is secure. ”

On Wednesday, Reuters also quoted Diess telling reporters that VW had just “decided to retrofit our coal-fired power plants to still be able to use coal or gas”, adding that this related to the company’s main operations in Wolfsburg.

VW announced its results for the first quarter of 2022 on Wednesday. Operating profit before special items reached 513 million euros (about $541 million), compared to 490 million euros in the first quarter of 2021. The company announced revenue of just under 15 billion euros compared to 17.6 billion euros in the first quarter of 2021. .

Diess’s remarks came the same day the European Commission, the executive arm of the EU, proposed new sanctions against the Kremlin that will include a six-month phase-out of imports of Russian crude.

“We will phase out Russian supplies of crude oil within six months and refined products by the end of the year,” European Commission President Ursula von der Leyen said in a speech outlining the plans.

“Thus, we maximize the pressure on Russia, while minimizing – and this is important – the collateral damage for us and our partners around the world,” she said. “Because to help Ukraine, we have to make sure our economy stays strong. »

Russia was the biggest supplier of petroleum oils and natural gas to the EU last year, according to Eurostat. Towards the end of April, the Russian state energy company Gazprom halted deliveries to two EU countries, Poland and Bulgaria, because they refused to pay for the gas in roubles. The move has led many to fear that other EU countries will also see their supplies cut off.

Geopolitical instability, volatility in energy markets and the Covid-19 pandemic have all raised concerns in some quarters that any transition to a global economy centered on renewable energy could be delayed or prevented.

During an interview with “Squawk Box Europe” on Wednesday morning, the CEO of shipping giant Maersk offered a cautiously optimistic outlook.

Søren Skou said that “a higher oil price, all things being equal, will help the green transition because it will reduce the extra costs, if you will, for greener fuels”.

“So we see this more as a way to accelerate the green transition than to push it back. »

– CNBC’s Silvia Amaro contributed to this report

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