Germany is turning against coal as a fuel for generating electricity, a move that will boost the nation’s reliance on natural gas from Russia.
Alarmed that curtailing nuclear power has prompted utilities to burn the most coal in six years, Chancellor Angela Merkel’s government is working on a plan to reinforce Germany’s commitment to reduce fossil-fuel emissions. The Economy Ministry on Oct. 31 published a paper laying the groundwork for the most strict steps yet to limit coal in Europe.
The shift, if implemented, would force Germany to tap Russia for additional supplies, to import power from neighbors and to further subsidize renewables such as solar and wind. That would swell the country’s 100 billion-euro ($126 billion) annual fuel import bill and may raise the cost of electricity paid by consumers, already the second-highest in the European Union.
It would also run counter to efforts by the U.S. and EU to isolate Russia economically.
“The importance of gas, and with that the dependence on Russia, will increase,” said Guido Hoymann, an analyst at B. Metzler Seel Sohn & Co. KGaA. Cross-border exchanges of electricity also would rise, helping the nuclear plants just outside Germany’s border, he said.
Gazprom Benefits
Scaling back coal would help OAO Gazprom (OGZD), the state-controlled Russian producer that accounts for about a third of Germany’s gas imports. It would hurt utilities such as RWE AG and Vattenfall AB that operate coal-fired plants.
Germany currently gets about 45 percent of its electricity from coal and 11 percent from natural gas. Another 15 percent comes from nuclear reactors that Merkel has pledged to close by 2022. About 24 percent comes from renewables such as solar and wind, a portion the government intends to increase to as much as 45 percent by 2025 under a program known as the Energiewende.
Signs of the change in policy started emerging on Oct. 9, when Environment Minister Barbara Hendricks told the parliament in Berlin that the government will stop financing new coal plants and “critically review” utility plans to build them. While an immediate exit would be “irresponsible,” she said, coal should be restrained “step by step.”
The Economy Ministry’s Oct. 31 paper also presented the shortcomings of Germany’s current power market, saying policies need to be updated to reflect a growing share of renewables and ensure supply is secure and cost-efficient.
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