German coal industry underpins renewable push

By Richard Anderson Business reporter, BBC News Or so the common narrative goes.

But try telling that to Monika Schulz-Hopfner. She and her husband, along with 250 other residents of Atterwasch, a quiet village near the Polish border, face eviction from their home of 30 years to make way for the Janschwalde-Nord coal mine.

And not just any old coal, but lignite, the dirtiest form of this ancient fossil fuel that is mined in vast opencast pits.

If the plans go ahead, the village, parts of which date back more than 700 years, will be demolished.
"Since the plans for the mine were unveiled in 2007, we have lived with this constant threat, which has taken over the lives of every individual and the community as a whole," says Mrs Schulz-Hopfner.
And the residents of Atterwasch are not alone.

In the eastern German region of Lausitz, nine villages are under threat, where up to 3,000 people could lose their homes to make way for five new lignite mines that are fuelling the country's renewed thirst for coal. Two further mines are under consideration.

The mines are needed to power a new generation of coal power plants.
Two new lignite plants were opened in 2012, with a further two in the pipeline. Another two hard coal plants also opened last year, with a further five opening this year or next, with two more awaiting licences.

The effects are already being felt. Lignite production in 2012 hit its highest level for almost 20 years, while initial estimates suggest this brown coal was used to generate 162bn kWh of electricity last year, more than in any year since 1990. The use of hard coal also increased, meaning the two energy sources accounted for 46% of Germany's overall energy production.

The impact on CO2 emissions has been immediate. "There has been an increase of between 5%-7% in CO2 in the past two years," says Prof Claudia Kemfert, head of energy at the German Institute for Economic Research.

And this in a country that aims to reduce emissions by 40% from 1990 levels by 2020.
As Prof Christian Hey, secretary general of the German Advisory Council for the Environment, says: "Germany has a coal problem."

There are many reasons why.
One is the low cost of carbon. "Due to the failure of the emissions trading system, the price of CO2 permits is very low," says Prof Hey. "The EU has failed to address this issue."
Oversupply and a fall in demand for energy - and therefore permits - during the economic downturn means the price now stands at around three euros per tonne of CO2. If everything had gone to plan, the price would be more than 10 times that by now.

Overcapacity has also pushed the price of coal lower, while the lignite industry has benefited to the tune of 60 million euros from being exempt from supporting the renewables industry, says Prof Hey.
This means the fossil fuel has moved down what is called the merit order curve. This was introduced in Germany in the 1990s, and determines the order in which energy sources are used to satisfy demand. The cheapest source is used first, the second cheapest second, and so on.
Until the carbon price rises, then, lignite is set to remain at the heart of German energy production.
"This is one of the biggest inconsistencies of the energy transition, and if the government wanted to address it, it could," says Prof Hey.

"To address this paradox, the government needs to adopt a regulatory approach on coal. It is relying on the market, rather than regulation, and this is key to the problem."
Or as Prof Kemfert puts it: "The government isn't doing anything."

In fact, the new coalition has said that all fossil fuel power sources are equally important for the security of supply for the foreseeable future.

But despite government inaction, there are some reasons to believe the growing use of lignite may not last.

All the new coal plants built in recent years, together with those that are due to open this year and next, were given the go-ahead about 10 years ago, when energy prices were much higher than now. Some argue that such massive investments are simply not viable in today's economic climate.

As Mariana Heinrich at Poyry Managing Consulting says, these plants "represent the end of a business cycle and not a longer term trend".

More importantly perhaps, "there is no public or political appetite for building [new coal plants] for the next 30-40 years," argues Lars Waldman, senior associate at the Agora Energiewende think tank.
And he says that lignite is not needed to fill the gap that will be left by phasing out nuclear power, a decision taken as far back as 2000.

"We hope and think that gas will fill the gap, as there is enough installed capacity," says Mr Waldman. This capacity is largely dormant right now due to the cheap price of coal, and the rising price of gas.
"From the economic side, renewables and gas can be the cheapest way to cover all demand."
Mrs Schulz-Hopfner will take little comfort in that.

"It is idiotic. We don't need more and more lignite because we are using more renewable energy," she says. "If we Germans truly want the Energiewende (energy transition), then no more villages should be demolished."

But the new generation of coal plants means the fossil fuel will remain a key component of Germany's energy mix.

The fact that lignite will always be cheap to produce, allied with a powerful pro-coal lobby in German politics, means the temptation to rely on this dirty fuel will remain strong as long as the carbon price remains low.

For a country that, in so many respects, is a leader in clean energy, not to mention committed to stringent carbon dioxide emissions reductions, this contradiction seems odd to say the least.

This article is part of a series of features on the future of energy. The next, published on Monday 14 April, will look at attempts to mine coal more cleanly.

Labels: Energy, Environment, Germany, Resource Extraction

posted by Pieface @ Thursday, April 10, 2014