Germany & The Coal Exit

February 13th, 2016 by Rob Compton

All translations my own and without liability.

Germany has made well-publicised strides towards cleaner electricity generation, with renewables accounting for 30% of the country’s electricity mix in 2015. Yet quitting smoking is not easy and, as critics are quick to point out, Germany’s fleet of coal-fired power stations continues to run.

The debate in the country surrounding the phasing out of coal-fired electricity generation – the Kohleausstieg – is an intense one. Coal critics are pushing for a faster exit, emboldened by the Paris agreement, the government’s target of meeting 80% of gross electricity consumption with renewables by 2050, and the need to “keep it in the ground.” Opposition comes mainly from the trade unions and mining regions where 16,000 people are employed in lignite mining.

Kicking the Habit

Lignite – or brown coal – is black coal’s dirtier cousin. 178 million metric tons of it were extracted through opencast strip mining in Germany last year, with the majority used to fire nearby power stations. Lignite has a low heat content, which means that compared to energy-denser black coal, more CO2 is released per megawatt when it is burned.

Lignite-fired plants are also less able to respond flexibly to price signals from the market. They used to make serious money during peak demand hours when prices were highest. However, electricity from renewable sources has grid priority, PV generally peaks around midday, and electricity from wind is now often in large supply. This, combined with inflexible conventional baseload (e.g., from lignite, nuclear, and black coal), pushes prices down – increasingly often into negative territory.

The renewable operators, however, have negligible variable costs – sunlight and wind are free – and they receive a fixed tariff for every kWh they supply. Lignite plants are even at times reducing their “baseload” generation in response to high levels of generation from wind despite their inflexibility. Nevertheless, a surplus often remains and German electricity exports set a new record last year.

In 2015, lignite and black coal accounted for 24% and 18.2% of Germany’s gross electricity generation, respectively. Germany’s lignite-fired installed capacity has remained largely constant. However, plans are being discussed to mothball 13% (2.7 GW) of the capacity in an emergency reserve for four-year periods starting in 2016.

Lignite Woes

The plant operators are suffering financially. The Swedish state-owned energy company Vattenfall has put its German lignite power stations and associated mines in the eastern states of Saxony and Brandenburg up for sale following pressure from the Swedish government to withdraw from coal-fired energy.

Last week, SZ-Online ran a piece on the proposed sale. “Vattenfall (…) is suffering under the low electricity price (…) and the ever-greater-loss-making lignite business. (…) Now Vattenfall is faced with lower asset values,” the website’s Stockholm correspondent writes. The article quotes the company’s CEO, Magnus Hall: “The German decision to reduce emissions in the long-term has exposed the value of our lignite assets to a risk.”

The Swedish branch of Greenpeace created a PR sensation by offering to buy and shut down the plants, although its offer was later rejected.

A number of potential buyers remain in the running, including the Czech energy company ČEZ. Although, it is now demanding guarantees, RBB reported last week.

Binding offers are to be submitted by March.

An Ace in the Hole?

In addition to CO2, German coal-fired plants are responsible for over five metric tons of mercury emissions every year. It is a substance that can cause a wide range of serious health problems.

“Should talks about an orderly exit from coal by 2050 fail this year, the federal government has a plan B up its sleeve,” Dagmar Dehmer suggests, making a bit of a leap in an article for Der Tagesspiegel on Sunday. She refers to the Minamata Convention on mercury emissions, which Germany plans to ratify with the EU at the end of the year or in early 2017.

Dehmer cites a Federal Ministry for the Environment spokesperson who stated that, following ratification of the convention, the government wants to set new rules for limits on mercury emissions. “It is our goal that mercury emissions from coal-fired power stations be a low as possible. The best available techniques must be used for this,” the spokesperson said – I assume referring to the EU’s BREF or “best available techniques reference document” for large combustion plants, which is currently at the working draft stage. According to Dehmer, this would “no longer be worthwhile for old lignite-fired power stations.”

The article was updated on Monday to reflect a reaction on Twitter from the State Secretary at the Federal Ministry for the Environment Jochen Flasbarth, who stressed that new mercury limits were not a “plan B” or an alternative to closing coal power plants.

Indeed, the Federal Minister for the Environment, Barbara Hendricks, told Die Welt recently, “If we want to meet our medium-term climate protection targets, we need to take leave of coal energy. (…) And with that, a major source of mercury disappears as well.”

Germany’s Coal Exit is Inevitable…

…that much is certain. The government has set its targets and has international obligations. The debate now is not about whether, but how to achieve it and how fast.

The Federal Minister for Economic Affairs and Energy Sigmar Gabriel opposes an “overly hasty” coal exit, and told energy industry managers recently, as reported in Die Welt, “It is hard to understand why we should once again start with national targets for coal-generated electricity when we are really all in agreement that climate protection efforts only make sense on the European level. (…) My suggestion is that we reverse the order. (…) First we get European emission trading up to speed and then we can talk in an ideology-free way about the consequences for national electricity generation.”

As the article points out, while the think tank Agora Energiewende recently put forward a concept for an exit from coal by 2040, the lignite mine operators expect an exit by 2050. “I cannot imagine that these ten years’ difference pose an insurmountable problem,“ Gabriel is reported as saying.

The Outlook

It remains to be seen how the German government will proceed towards an exit from coal – be it on the European level with toughened-up emissions trading, through national efforts such as an emergency reserve, or otherwise. It will also be interesting to see what happens with the proposed Vattenfall sale.

But the fact remains that lignite and black coal currently produce 42% of Germany’s electricity and that with the remaining German nuclear plants set to be taken offline by 2022, more renewable capacity, domestic grid expansion, more international interconnections, an increase in grid-scale storage, and major energy efficiency savings will have to be part of any technical solution alongside a social and economic package for the lignite-producing regions.

The debate continues.

Image via Shutterstock









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