ENERGY TRANSITION Plotting King Coal's Downfall

An influential think tank wants Germany to mandate the complete phase out of coal by 2040 at the latest, but companies and some politicians worry that such a rapid, final change will threaten the country's energy security.
Coal-power station in Dattlen.

Germany is in the throes of a love-hate relationship with coal. The reasons to hate it are obvious. Coal is a fossil fuel, that releases greenhouse gases, and is not the type of clean, renewable fuel the country is moving towards. But there is another side to the debate: Germany needs coal now, as much as it ever did.

In aftermath of the 2011 Fukushima nuclear disaster in Japan, Chancellor Angela Merkel's government and the German parliament agreed to completely phase out nuclear energy by 2022. The country plans to meet at least 80 percent of its energy needs through renewable sources by 2050.

But the country's renewable sector has not yet grown fast enough to fill the gap left by nuclear fuels. So Germany has turned to brown coal or lignite, one of the most polluting of fossil fuels, to fill the gap. The country with one of the most ambitious green energy policies in the European Union is also a country that generates a huge chunk of its energy from coal.

Now Agora Energiewende, a Berlin-based think tank with close ties to the government wants to have a national debate on the future of coal in Germany and set up a goal that the country phases out coal as an energy source by 2040.

"This agreement should – like the nuclear consensus – lead to a law mandating the exit from coal, enacted by a broad majority of the upper and lower houses of parliament," said Patrick Graichen, the executive director of Agora.

Under Agora's ambitious plan, Germany would begin phasing out three gigawatts of coal power annually beginning in 2018, the equivalent of three to four large coal stacks a year. In addition, coal plants over a certain age would also be shut down, and the age for retiring plants would be lowered over time. The emission permits freed up by shutting down the plants would be taken out of circulation.

The expansion of renewable energies is important, but it has to be secured with power plants that can be directed and controlled. Supply security can under no circumstance fall short. Klaus Schäfer, head of Uniper

To help ease the pain of the transition, Germany's brown coal regions would receive €250 million ($272 million) in federal aid. The mining companies, for their part, would contribute €2.50 per megawatt hour of electricity toward mine reclamation. In return for the coal industry's support, the German government would promise not to impose any additional demands on it in the future.

This coal plan is all the more important given the revolving door that exists between Agora and the federal government. Mr. Graichen worked for many years in the environment ministry. His predecessor at Agora, Rainer Baake, is now a junior environment minister.

Agora also has close ties to the economics ministry, and the think tank's ideas often find their way into proposals made by the economics minister, Sigmar Gabriel, who also serves as vice chancellor in the ruling right-left coalition.

When asked by Handelsblatt about Agora's plan to phase out coal by 2040, sources at the economics ministry would only say they were monitoring the debate. While that's a far cry from an enthusiastic endorsement, the plan does have its supporters in the ministry.

And in the wake of the Paris climate agreement, there's a renewed political impetus to reduce carbon emissions, already a pet project of Chancellor Angela Merkel. Germany has set a goal of reducing its emissions 40 percent below 1990 levels by 2020.

Emissions, however, have been reduced only by 27 percent so far. With the clock ticking, Environment Minister Barbara Hendricks has warmed to the idea of mandating an exit from coal in order to make progress toward Germany's emissions goals. Ms. Hendricks wants to present a long-term national plan to fight climate change by the end of the summer, and an exit from coal would give the plan more bite.

The Green Party's parliamentary group has even more ambitious goals. According to their recent declaration in the city of Weimar, Germany should phase out all coal within 15 to 20 years.

 

In the Right Direction-01

 

But not everyone agrees that coal should be phased out so fast. Industry and some politicians from the center-left Social Democrats are concerned about the potential impact on the country's economy and energy security.

Utilities also want a more measured change. Responding to the move toward renewables, the electricity giant E.ON separated its fossil fuel assets into a spin-off company called Uniper last spring. It now says the government must focus on energy security.

"The expansion of renewable energies is important, but it has to be secured with power plants that can be directed and controlled," Klaus Schäfer, the head of Uniper, told Handelsblatt. "Supply security can under no circumstance fall short."

Bernd Westphal, the Social Democratic parliamentary spokesman for economic policy believes that it makes no sense for an industrial power like Germany to simultaneously phase out nuclear energy and coal.

Michael Vassiliadis, head of the IG BCE trade union, which represents workers in the mining, chemicals and energy sectors agreed, adding that finding a way to store electricity from renewable sources is a precondition for a successful energy transition.

"As a center of high-performance industry, Germany needs different priorities in energy policy," he told Handelsblatt.

Right now, renewable sources can cover Germany's electricity needs for only a few hours every year. Until a cost-effective way is found to store electricity from renewables and build reserves, Germany will need fossil fuel plants as back up to prevent shortages. A shortage of even a few minutes would "already be a real problem," Mr. Schäfer said.

Given these unresolved problems, the powerful leader of Germany's industrial heartland has altogether rejected timetables for phasing out coal.

"Fossil fuel plants are indispensable for the foreseeable future," Hannelore Kraft, the Social Democratic premier of North Rhine-Westphalia, told Handelsblatt.

Nevertheless, the debate over phasing out coal has come at difficult time for the former electricity giants. Wind and solar energy, supported by state subsidies, are undercutting many traditional fossil fuel plants. Given this economic pressure, some observers believe that Berlin won't have to make plans to phase out coal after all. The industry may simply die out on its own.

 

Jürgen Flauger covers the energy market for Handelsblatt, including electricity and gas providers, international market developments and energy policy. Klaus Stratmann is the deputy bureau chief of Handelsblatt in Berlin and also covers the energy market. To contact the authors: [email protected] and  [email protected]