Coal and nuclear phase out in Germany

Phil Johnstone

SPRU

University of Sussex

Germany and coal in context • Coal still accounts for 40% of electricity generation in Germany down only 10% from

2000.

• the cost of environmental damage related to lignite amounted to 16.8 billion euros ($18 bilion) in 2014 alone. Brown coal is responsible for a third of all CO2 emissions in the western German state of North-Rhine Westphalia

• Nearly 90% of lignite production is used for power generation (159.3 million tonnes in 2015), accounting for 23.9% of total power generation in Germany.

• CCS projects abandoned in Germany in 2013.

• In 2015 renewables accounted for over a third of final electricity consumption overtaking lignite as main source for the first time.

Germany’s coal problem

• Germany is at risk of missing its 2020 target for cutting greenhouse gas emissions by 40 percent from 1990

• Emissions were down by just 27 percent in 2015.

• Analysis suggests 25% of Europe’s currently operating coal-fired power units need to be shut down by 2020, rising to 72% by 2025, before a complete shutdown by 2030 for EU to remain in carbon budget (Climate Analytics)

• 7 out of 10 dirtiest power stations in Europe are coal plants in Germany.

• German coal power plants are hindering reduction in CO2 emissions not only at home, but also abroad. Exports to Austria, France, Switzerland, Netherlands.

Germany and coal mining• Germany’s extraction of hard coal will end in 2018, after the

expiration of government subsidies

• Germany’s coal miners and users expect the country’s last brown coal mines to close by around 2045.

• The mining company RWE is planning the expansion of some of Europe's biggest coal mines - Garzweiler and Hambach.

• Germany was the EU’s largest hard coal importer in 2015.

• 15, 428 jobs in Lignite mining industry; 9, 000 jobs in hard coal mining. Hard coal mining finishing in 2018 but no date set for lignite.

Germany’s Coal policy• Power stations producing some 2.7 GW of power from lignite coal — one

of the most carbon intensive of all energy sources — will be closed by 2017.

• some or all of the stations to be closed will be kept as a reserve source of supply for at least four years beyond 2017. As a back up to growing wind and solar supplies.

• As an incentive for utilities such as RWE and Vattenfall to maintain these stations’ capacity, payments will be introduced.

• A draft economy ministry document in early 2016 showed plans to end coal-fired power generation, the most carbon-intensive form of energy, “well before 2050”

• initial idea by the Economics Minister Gabriel in Germany to implement a coal tax for old and inefficient power plants – rejected.

• “I will not call for a commission to deal with a coal exit,” SigmarGabriel Economics Minister, 2016.

Coal in context of Energiewende• key part of Energiewende: phasing out nuclear power by 2022. • Is this to blame for increases in coal?• Recent projects started in 2005-2007 as part of an overall trend in Europe

caused by low carbon prices and upcoming stricter pollution standards for coal plants.

• Low cost of coal means more expensive but cleaner gas plants not running at full capacity.

• However, Germany lacks specific policies to reduce lignite and increase natural gas use. Unless that changes, the market is unlikely to bring about a reduction in power production from lignite until the mid-2020s

• Governance of discontinuation required. ‘Flip sides’ to innovation. But what are the implications of phase out policies on innovation and growth of new technologies?

Phase out policies

Rheinhart and Rogge (2015)

• Survey of German manufacturers of renewable power generation technologies

•Conducted: April-Juli 2014

•Response rate: ca. 36% (n=390)

•Regression and factor analysis

• Rogge Karoline. Johnstone, Phil. (forthcoming 2017) “Exploring the role of phase-out policies for low-carbon energy transitions: the case of the German Energiewende” Energy Research & Social Science.

Which instruments support renewables most?

• Destruction: Nuclear phase-out supports the expansion of renewable energies the strongest; stringency required (EU ETS)

• Creation: Public R&D/ innovation funding, training of skilled workers and the EEG are considered equally important instruments (TP, S, DP)

Support of the expansion of renewable electricity generation through:

9%

7%

11%

8%

10%

20%

34%

32%

8%

19%

19%

22%

24%

33%

28%

31%

13%

30%

26%

29%

39%

31%

20%

21%

20%

21%

21%

24%

19%

11%

11%

10%

28%

16%

14%

11%

5%

22%

6%

9%

6%

40%20% 60%0% 80% 100%

5

4

33

EU Emission Trading System (EU ETS) 4

2 Ø=2.9 (n=309)

Ø=3.3 (n=378)

Ø=2.3 (n=365)

Ø=2.3 (n=371)

Ø=2.5 (n=301)

Ø=3.3 (n=340)

Ø=3.4 (n=360)

Ø=4.2 (n=385)

3 54 6 (fully supports)21(no support at all)

Phase-out of nuclear energy by 2022

Public R&D/innovation funding

Promoting the training of skilled workers for the renewable branch

Renewable Energy Sources Act (EEG)

Energy Industry Act (EnWG) and other policy initiatives to expand the grid

Federal Nature Conservation Act and its implementation

Policy framework conditions for fossil electricity generation

Demand pull

Tech push

Systemic

The implications of phase out on innovation

• What drove companies‘ innovation activities?

• Policy mix drives innovation by generating demand for RE

• Domestic and foreign demand pull instruments influential (today‘s and expected), but equally important also 2025 RE expansion targets and credible commitmentto Energiewende (more than R&D support)

20%

21%

28%

24%

26%

22%

33%

45%

15%

17%

13%

17%

19%

23%

19%

27%

13%

21%

20%

16%

18%

16%

27%

20%

15%

23%

14%

15%

13%

13%

11%

16%

14%

7%

30%

17%

15%

15%

15%

14%

8%

8%

26%

13%

12%

15%

13%

14%

5%

6%

4%

4%

100%0% 60%40%20% 80%

Ø=2.6 (n=310)

3

Other supportive laws and regulations in Germany

R&D or innovation funding for renewables from DE and EU Ø=2.8 (n=312)

Expected future support under theamended Renewable Energy Sources Act (EEG 2.0)

Ø=3.1 (n=315)

Credible political commitment to the Energiewende Ø=3.2 (n=316)

Existing and expected foreign support for renewable energies Ø=3.2 (n=308)

Political expansion targets for renewable energies for 2025 Ø=3.2 (n=317)

Existing support under the German Renewable Energy Sources Act (EEG)

Ø=3.3 (n=317)

Demand for innovations from customers Ø=4.5 (n=322)3

Ø=2.1 (n=302)EU Emission Trading System (CO2 price)

6 (very strong influence)4 5321(absolutely no influence)

Influence of demand and political factors on innovation activities in the RE branch (2011-13)

Policy mix credibility. Strength of political will.

• Perceived political

will to expand

renewable power

generation was at

its peak at the

nuclear phase-

out after

Fukushima and

has decreased

ever since1

2

3

4

5

6

2013 until parliamentary

elections

2013 20152011/2012 Today

1 =

not

str

on

g a

t all

to 6

= v

ery s

tro

ng

Strength of the respective German government’s political will regarding the promotion of renewable electricity generation at five points in time (n=368)

(nuclear phase-out after Fukushima)

(electricity price debate)

(Coalition agreement ofthe Grand Coalition)

(latest amendment of the EEG (EEG 2.0))

(Expectation)

Final thoughts

• Germany’s coal conundrum: technological or a matter of political will?

• Vested interests but legitimate concerns: coal jobs. What happens after German election 2017?

• Need to ensure a ‘just transition’ and more directed industrial policy.

• Phase-out policies: strengthening innovation, firm decisions enhancing credible commitments of policy mix (UK as contrast).

Thanks!