Germany’s energy contradictions exposed

Germany’s energy contradictions exposed

As Germany is currently falling short of its ambitious plans to cut CO2 emissions, Vice-Chancellor and Federal Minister for Economic Affairs and Energy, Mr. Sigmar Gabriel, announced in early 2015 the intention to impose a climate levy on ageing power plants. As this change in regulation would be highly relevant for the balance sheets of power suppliers, the panel discussion of the 61st Special Energy Dialogue at the Reichstag focused on its possible impact on the future of Germany’s coal sector.

Despite Germany being a trailblazer in the field of renewables, it is, at the same time, one of the developed countries with the highest consumption of coal, and this has led to the contradiction that whilst far-ranging measures to protect the climate have already been introduced in Germany, emissions have been rising over the past three years. The nuclear power phase-out, decided upon following the Fukushima catastrophe, increased the reliance on coal-based electricity production, which currently is responsible for a third of all emissions in the country. Consequently, the government feels increasingly compelled to react by tightening environmental regulations on the energy market. Chancellor Merkel has also taken the opportunity of the G7-Summit she hosted at the beginning of June, in the Bavarian Elmau, to firmly put climate protection at the top of the international agenda. As a result, the “decarbonisation of the global economy over the course of this century” and “deep cuts in global greenhouse gas emissions” were agreed.

The goal pursued by the Federal Ministry of Economy and Energy through the proposed regulations, is to cut the emissions of coal energy production by 16 million over the next five years, in order to prevent the country from falling short of the overall target of lowering carbon dioxide emission by 40% by 2020, as compared with 1990 levels. More precisely, power suppliers would be required to pay a climate levy on CO2 emitted, above a limit of seven million tonnes per gigawatt of installed capacity in coal plants older than 20 years. Though environmental associations widely regard this instrument as a necessary step to make coal power plants contribute to climate protection,, trade unions and businesses fear that this levy could put about 100,000 jobs at risk and increase already high domestic energy prices.

Strong conflicting interests were expressed in the debate at the 61st Energy Dialogue at the Reichstag. Mr. Rainer Baake, State Secretary at the Federal Ministry for Economic Affairs and Energy, highlighted that all German administrations have undoubtedly committed themselves to the ambitious emissions-reduction targets for 2020, which were first introduced by the Green-Social Democratic Coalition in 2002. As Germany seems to be falling short on its own goals, while the year 2020 is rapidly approaching, this can only be regarded as inconsistent, Baake noted. Therefore, he sees the need for additional measures, especially putting the brakes on coal-based power generation, as being necessary, and part of an existing consensus. In his opinion, this measure should only be a temporary mechanism to make the sector deliver its contribution to the ‘Energiewende’.

State Secretary Baake argued that a variety of instruments to achieve further CO2 emission reductions in the coal sector have been openly discussed. The Ministry concluded that requiring coal plants older than 20 years, and exceeding a certain emissions threshold, to pay a fee determined, in relation to the real development of wholesale energy prices, would be the most appropriate short-term solution in the wider European context.

Mr. Alf Henryk Wulf, CEO of ALSTOM Power, reminded of the growing importance of coal as an energy resource in the rest of the world. Whilst Germany seems to increasingly limit the role of coal in its energy mix, he pointed out that European technologies are the most advanced and energy efficient means of generating electricity, and should therefore keep playing a pre-dominant role in the global coal market. However, he observed that this would become more difficult when regulatory instruments distort the market in Germany, making research and development more costly, undermining planning predictability, and considerably hindering the export of advanced technology to foreign markets.

In Mr. Wulf’s opinion, coal has to remain a pillar of the German and European energy generation, as it has the potential to become a clean contributor to the energy mix, if modern technologies are given their due focus. Therefore, he claimed that vilifying the coal sector fails to acknowledge its enormous potential to contribute to a cleaner global energy generation.

The vibrant discussion that ensued went deeply into the need for a national climate and energy policy, to take into account European legislation and greater global trends, so that Germany’s role as a pioneer does not lead to unco-ordinated and solitary efforts. Furthermore, planning certainty and the integration of the heating sector into energy policy were subjects that also contributed to the heated debate.

The 61st Special Energy Dialogue at the Reichstag was held at the Commerzbank on May the 26th, at the invitation of Prof. Dr. Pflüger, Janusz Reiter and Central European Energy Partners (CEEP).

Alexandru Zegrea, Consultant, Pflüger International