A year after Germany’s 28-member “Coal Commission” presented a fragile compromise brown coal phase-out, in mid-January Merkel’s Grand Coalition government formally released their own plan. Breaking with the Commission’s recommendations by slowing down the pace of the phase-out, immediately greenlighting the new Datteln 4 hard coal plant and showering RWE and other coal operators with billions of Euros, it also calls for more gas plants and additional wind turbine construction limitations. Neither ensuring Germany can adhere to the Paris Agreement nor its own clean energy targets, environmental groups are outraged as investors celebrate. L. Michael Buchsbaum takes us into the dirty deal.
Catch 2038: too little, too late, too expensive
First, the good news: Germany, the world’s largest miner and burner of filthy brown coal, which makes up some 19% of the nation’s electricity, finally has a plan to phase it out. Germany’s coalition government, made up by the center-right CDU/CSU and center-left SPD, heaped praise upon itself during their press-conference announcing the deal, reminding detractors how challenging simultaneously phasing out hard and brown coal as well as nuclear will be. While promising that perhaps all of the nation’s lignite plants will close by 2038, one of the many questions broadly left unanswered is which forms of power will step into the void coal leaves behind—or how clean they’ll really be.
Now for the bad news, and there’s a lot of it.
Embedded within the government’s new scheme is a paradox. In order to safely and responsibly phase out coal over the next twenty years, Germany needs a new “climate friendlier,” brand-new 1,100 MW hard-coal fired power plant to come on-line this summer, Uniper’s Datteln 4. However, to “balance” this out and claim some real climate progress, a single 300 MW lignite block will shut down on the 366th day of 2020, December 31. This will be followed by shuttering another 2.8GW of capacity by 2022 and 5.7GW through 2030.
One of the reasons for the slow-paced phase-out is the need to simultaneously build out more renewable energy as well as construct a vast new fossil gas infrastructure to fill in lignite’s gap. While the government debates lifting the 52-gigawatt cap on solar, the proposed Coal-Exit plan adds even more restrictions to the expansion of onshore wind—which just last year surpassed brown coal in both capacity and output.
Though the government has increased the offshore wind expansion corridor, how the renewable energy build out will be accelerated so that their share of electricity generation will increase to 65 percent by 2030 was not at all part of the proffered plan.
What is spelled out, however, is a vast increase on gas dependence, as the plan calls for the immediate construction of several new fossil gas-fired power plants, pipelines and LNG terminals. This gas, increasing amounts of which will be imported from the U.S, is being greenwashed as a bridge fuel to so-called Power-to-gas projects, not all of which are remotely environmentally friendly.
Staggeringly, here’s where the deal gets even worse. Not only will the coal operators themselves essentially choose which plants come offline in a series of government auctions, the actual speed of the phase-out is predicated upon the progress of the future gas and renewables build out. Any delays to either will ensure a longer lignite burn.
Follow the Money
To soften the blow of the hardships they’ll be facing, RWE, LEAG and other coal operators will accept 4.35 billion euros in compensation while the four affected lignite-mining states will receive over 40 billion euros to restructure their economies.
The corporate welfare, something the Coal Commission strongly recommended against, translates to 2.6 billion euros for RWE in western Germany and 1.75 billion for eastern operators (a figure which could still rise!). Nevertheless, RWE complained that the funds still wouldn’t cover all their future lost profits. A “conservative estimate” would be at least 3.5 billion euros, according to CFO Markus Krebber.
After struggling to come up with a plan acceptable to both Merkel’s coalition and their own corporate interests, CEO Rolf Schmitz defended the speed of the phase-out, lamenting that RWE had gone “to the limits of what is possible” as the beleaguered firm “will need to take significantly more generation capacity off the grid in significantly less time than expected.” Company share prices, reflecting this burden, rose over 3% on the news of the deal, shooting stocks to their highest level since 2014.
In an interview with broadcaster NTV.de, Prof. Dr. Claudia Kemfert, head of the Department of Energy, Transport, and Environment at the German Institute for Economic Research (DIW Berlin), criticized Merkel’s Grand Coalition’s Coal-exit plan for “requiring a lot of money for very little climate protection.” Out of all the options available, “the most expensive solution was chosen,” she said. Worse, if the new Datteln 4 hard coal plant indeed comes on line, she fears it will be nearly impossible for Germany “to achieve its Paris climate goals.” Indeed many economists worry the plan will actually increase emissions over the long haul. Patrick Graichen, the head of Germany’s Agora Energiewende think tank, says the plan is so devoid of ambition it will inevitably be reopened by the next administration. “The next battle will be the next government,” Graichen says.
Many leading environmental groups were also outraged by the plan. Olaf Bandt, Chairman of the German Federation for the Environment and Nature Conservation (BUND) called it “a climate policy disgrace, showing once again that the federal government has not understood the scope of the climate crisis.” Herman Ott of NGO Client Earth said the phase-out law “comes from a different universe to the one where Australia is burning” and each month is hotter than the next. Sadly, the new plan ensures that Germany will neither adhere to its climate targets nor enjoy any social peace over the burning coal debate.
Like so many things, the coronavirus has disrupted both the hearing schedule for the coal exit bill in Berlin as well as the adoption of a final implementation and phase out plan. Regardless, the longer German legislators are unable meet, hammer out the final law and begin removing thousands of megawatts of coal-fired power from the grid, the more carbon pollution will continue to billow into the atmosphere. In the meantime, Uniper in mid-March assured its investors that Datteln 4 will commence full commercial operations this summer.
This article is an updated version of a blog post that was first submitted in February 2020.