Merkel’s Green Shift Forces Germany to Burn More Coal: Energy

August 19, 2012 by  
Filed under Green Energy News

Chancellor Angela Merkel’s
government says RWE AG (RWE)’s new power plant that can supply 3.4
million homes aids her plan to exit nuclear energy and switch to
cleaner forms of generation. It’s fired with coal.

The startup of the 2,200-megawatt station near Cologne last
week shows how Europe’s largest economy is relying more on the
most-polluting fuel. Coal consumption has risen 4.9 percent
since Merkel announced a plan to start shutting the country’s
atomic reactors after last year’s Fukushima disaster in Japan.

Germany’s largest utilities RWE and EON AG (EOAN) are shunning
cleaner-burning natural gas because it’s more costly, while the
collapsing cost of carbon permits means there’s little penalty
for burning coal. Wind and solar projects, central to Germany’s
plans to reduce nuclear energy and cut the release of heat-
trapping gases, can’t produce electricity around the clock.

Angela Merkel’s policy has created an incentive structure
which has the effect of partially replacing nuclear with coal,
the dirtiest fuel that’s responsible for much of the growth in
the world’s greenhouse-gas emissions since 1990,” Dieter Helm,
an energy policy professor at the University of Oxford, said by
phone Aug. 17. Building new coal stations means “locking them
in for the next 30 years” as a type of generation, Helm said.

Germany’s increasing coal consumption is part of a global
return to the fossil fuel that’s cheaper than most alternatives.
The amount of coal burned worldwide rose 5.4 percent to account
for 30 percent of total energy use last year, the highest
proportion since 1969, according to BP Plc (BP/) data.

Clean-Dark Spread

The German clean-dark spread, a measure of profit that
utilities can earn from selling coal-generated power after
accounting for the cost of carbon-emission permits, was about
9.75 euros ($12.00) a megawatt-hour last week for the year
ahead, according to broker data compiled by Bloomberg. At the
same time, utilities are set to lose about 10 euros a megawatt-
hour from burning gas according to data compiled by Bloomberg.

“Lignite is the lowest-priced type of power generation and
thus increasingly stormed the market,” Martin Pack, an RWE
spokesman, said by phone from Essen, referring to a type of soft
coal that dominates RWE’s consumption of the fuel.

EON generated 10 percent more electricity from burning coal
in the first half than in the same period a year ago. RWE’s
coal-fired power output in Germany rose by 12 percent in the
same period. Reliance on coal may continue to rise after
Statkraft SF shuttered its gas-fired plant in Emden in March and
EON and RWE warned they may mothball loss-making generators.

Permit Prices

Coal is being used in part because the prices for permits
that allow the emissions of carbon dioxide linked to climate
change
are too low to incentivize other forms of generation. The
price of carbon dioxide permits in the European Union has
dropped 43 percent over the past year.

Switching to coal from gas is “a consequence of the low
prices” in Europe’s carbon market, Helm said. “Germany needs
to exit coal and switch to gas as a transitionary fuel, not the
other way around, as quickly as possible if it really cares
about the climate.”

Merkel’s government wants utilities to build 10,000
megawatts of coal- and gas-fired generators this decade to
replace older, dirtier generators and underpin a growing share
for wind turbines and solar panels.

More Efficient

Building new coal generators in Germany isn’t easy. A group
of local utilities last month scrapped plans to spend 3.2
billion euros to erect the nation’s biggest hard-coal plant in
Schleswig-Holstein after resistance from environment groups and
the state’s Social Democratic Party, Green Party-led government.

The Greens, Germany’s second-biggest opposition group, are
against building new coal plants and favor gas ahead of
Germany’s federal elections due in the fall of 2013, when Merkel
seeks to win a third term as chancellor.

“We need to do a lot of things to make the German energy
switch a success, but building new coal plants is not among
them,” Oliver Krischer, energy spokesman for the Green Party’s
parliamentary group, said in a statement last month.

The BoA coal plant near Cologne shows how new fossil fuel
plants, which are more efficient than their older models, “not
only help to reduce carbon emissions, but can also make an
outstanding contribution to the success of the energy industry’s
transformation,” Environment Minster Peter Altmaier, who was
present at the plant’s opening last week, said in a statement
distributed by RWE.

Ensuring Supply

RWE says coal plants are key to ensuring supply security as
Germany raises the market share of renewable generation to at
least 35 percent by the end of the decade, and to 80 percent by
2050. BoA, which has an efficiency of 43 percent, can raise or
lower output by 500 megawatts per unit within 15 minutes, Peter Terium, RWE’s chief executive officer, told reporters in a call
on August 14.

It can “step in immediately when the wind is not blowing
or the sun is not shining,” Terium said.

Like most power plants in Germany, BoA burns lignite, a
soft coal that’s sourced from domestic open-cast strip mines and
emits about 29 percent more carbon dioxide than hard coal when
burned. Environmental groups are concerned about the growing use
of the fuel.

“It’s very alarming that leading German politicians praise
a plant run on lignite,” Gerald Neubauer, energy expert at
Greenpeace in Berlin, said by phone on Aug. 16. “Burning
lignite spews more carbon dioxide than using most other energy
sources, and mining it inflicts major damage on the
environment.”

To contact the reporter on this story:
Stefan Nicola in Berlin at
snicola2@bloomberg.net

To contact the editor responsible for this story:
Reed Landberg at
landberg@bloomberg.net


Enlarge image
Merkel’s Green Shift Forces Germany to Burn More Coal

Merkel’s Green Shift Forces Germany to Burn More Coal

Merkel’s Green Shift Forces Germany to Burn More Coal

Hannelore Foerster/Bloomberg

Visitors stand on the observation tower in front of the RWE AG coal-fueled power plant in Weisweiler, Germany.

Visitors stand on the observation tower in front of the RWE AG coal-fueled power plant in Weisweiler, Germany. Photographer: Hannelore Foerster/Bloomberg


Enlarge image
German chancellor Angela Merkel

German chancellor Angela Merkel

German chancellor Angela Merkel

Dimas Ardian/Bloomberg

Angela Merkel, Germany’s chancellor.

Angela Merkel, Germany’s chancellor. Photographer: Dimas Ardian/Bloomberg

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