Energy Dilemma Secret Power Talks

The economics minister, Sigmar Gabriel will meet on Tuesday for secret talks on whether a planned coal levy will cause power shortages in coming years. At the same time, officials of chancellor Angela Merkel's office are looking for alternatives to the controversial levy.
This brown coal power plant may be be shut down in the future.

It may look like squaring a circle.

Germany, as part of its bold plan to wean itself off fossil fuels by 2050, wants to exit nuclear power by 2022, slap a levy on the most polluting coal-fired power plants so that it can cut carbon emissions by 40 percent by 2020 – but also safeguard its power supply.

But how? The question was considered at a secret meeting on Tuesday between economics minister and Social Democrat leader Sigmar Gabriel and his deputy Rainer Baake, the green policy expert he hired to speed up the transition to renewable energy, together with Jochen Homann, president of the electricity network regulator Bundesnetzagentur (BnetzA).

After Japan's Fukushima nuclear disaster in 2011, Germany decided to shut down all nuclear power plants by 2022, favoring renewable energy sources, such as wind and solar power, instead. But the planned levy, which aims to discourage utilities from producing CO2, is deeply controversial. Energy companies say it will hit power generation and cost thousands of jobs.

As conventional plants are closed, the risk of power outages is mounting because an ever-increasing share of electricity depends on the whims of the weather.

Given the sensitivity of the topic, it is unsurprising that the politicians were eager to keep their deliberations away from the public eye.

They planned to discuss how Germany can guarantee electricity supply as nuclear power is phased out and, at the same time, coal-fired plants are shut down, Handelsblatt learned from political sources.

The country’s fast-growing renewable sector, partially funded by state subsidies, is crowding out gas and coal-fired power plants by making them unprofitable. But as conventional plants are closed, the risk of power outages is mounting because an ever-increasing share of electricity depends on the whims of the weather.

From 2022 at the latest, when all nuclear plants have been taken off the German grid, experts fear there will be a power gap so big that even Germany’s European neighbors won’t be able to plug it.

The levy planned by Mr. Gabriel, who hopes it will save 22 million tons of CO2, might add to the outage risk, some say. Mining and energy trade union IG BCE has warned that the levy will force up to 95 percent of coal-fired plants to shut down.

The government and energy industry are now embroiled in a row over power supply projections and whether electricity imports could close any gap in the electricity supply to Europe’s biggest economy.

Despite the concerns, the deputy economics minister, Mr. Baake, is optimistic. “Our power supply is safe and will remain safe in the future,” he said.

An energy study presented on Monday showed that his ministry’s plans even enhanced the stability of the power grid, Mr. Baake added.

Mr. Gabriel has repeated several times that the German chancellor and Christian Democrat leader, Angela Merkel, signed off on the idea of a levy on coal-fired power plants. But she is evidently concerned about what impact it will have.


Brown Coal Produced but not Consumed-01 Energy transition energiewende


Industry sources told Handelsblatt that Ms. Merkel’s officials are currently investigating how the energy sector could save 22 million tonnes of CO2 — without a coal levy.

The possible alternatives under consideration are an increase in energy efficiency and a doubling of the reserve of backup emergency power to eight gigawatts instead of the four currently planned. Reserve plants can’t sell their power in the market but are on standby if the network regulator asks for more power.

This buffer service already costs electricity consumers millions of euros in additional power charges. The costs could increase as utilities push to take unprofitable gas-fired power stations off the grid.

The network operator increasingly often prohibits this in order to safeguard the power supply. Last week, Darmstadt-based power company HEAG Südhessische Energie applied to temporarily mothball its new gas-fired plant. The request was denied because it was “imprecise.”

But if a power company is forced to keep an unprofitable plant hooked up to the grid, it is entitled to compensation. This could soon become more expensive. The regulator is currently reviewing the extent of compensation due in 50 cases following a ruling by the Dusseldorf Higher Regional Court.

The utility company now hopes it can get its capital costs reimbursed if it has to keep the plant online.

Video: Digging for coal in Germany.


Daniel Delhaes reports on politics, transport and airlines from Handelsblatt's Berlin office. Dana Heide reports on energy policy, small- and medium-sized companies and innovation from Handelsblatt's Berlin office. To contact the authors: [email protected] and [email protected]