German coal industry underpins renewable push

A protester against coal There is a strong anti-coal movement in Germany

Germany is an enlightened leader in the global battle to reduce CO2 emissions, a pioneer in renewable energy and community power projects and a champion of energy efficiency.

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.

Fuelling the future

"Every single decision we make is affected by it."

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.

Immediate impact

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.

German 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."

'Failure'

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."

Garzweiler open-pit coal mine The opencast lignite mines in Germany cover tens of square kilometres

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.

What is lignite?

  • Over time, peat is converted into lignite, which is then, due to heat, pressure and chemical changes over millions of years, converted into hard coal
  • The energy intensity of lignite is the lowest of all forms of coal, making it the least efficient
  • Because it is less dense, lignite burns much faster than hard coal
  • Lignite is extracted from opencast mines, which cover a far greater area than the deep mines used to extract hard coal
  • Lignite contains less carbon but more sulphur than hard coal

Source: World Coal Association, Store Norske

Renewables are currently the cheapest, followed by nuclear. Lignite comes next, followed by hard coal. And as the government has resolved to phase out nuclear power by 2022, lignite will move further down the curve.

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.

'No appetite'

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.

German energy production Campaigners want to stop new coal mines and the expansion of older mines

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 Waldmann, 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 Waldmann. This capacity is largely dormant right now due to the cheap price of coal, and the rising price of gas.

Monika Schulz-Höpfner Mrs Schulz-Hopfner wants to see more renewables, not lignite

"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.

More on This Story

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

BBC Business Live

  1.  
    06:55: LLOYDS JOB LOSSES BBC Radio 4

    Mr Hahn tells Today the UK banking industry needs to do more in the way of community banks. He adds banks are beginning to link up with supermarkets as a way of doing this but local communities are likely to suffer as more bank branches close. He says it has been "an error" of government policy that "we keep thinking in terms of challenger banks". What the UK banking industry really needs to think much more about is community banking and how to provide banking services to small communities, he adds.

     
  2.  
    06:41: LLOYDS JOB LOSSES BBC Radio 4
    A Lloyds Bank logo

    The 9,000 job losses at Lloyds Banking Group amount to about 10% of its total workforce. It is also expected to announce a series of branch closures. Cass Business School banking analyst Peter Hahn tells Today the way we buy things from banks has changed. That's putting pressure on bank branches. He says we'll see "fewer but better bank branches". "We'll see them more principally located, so big cities and market [towns]," he says. Mr Hahn suggests they will be slicker operations, more sales-oriented, but not used as much for "regular transactions."

     
  3.  
    06:28: GLAXOSMITHKLINE Radio 5 live

    Newspapers are reporting GlaxoSmithKline may spin off its HIV business. Holly Cook, managing editor of Morningstar's website for UK investors tells 5 liveWake Up to MoneyGSK's respiratory drug, advair is under "intense competition" and a sale through a public offer "will allow GSK to streamline itself" as its HIV drugs see "huge demand".

     
  4.  
    06:15: TESCO EARNINGS Radio 5 live

    "Like-for-like sales is the first number analysts will look at, followed by the accounting problems," says Holly Cook of Morningstar on Wake Up to Money. The online business may have done well while the supermarkets will be a "weak spot." Looking at Tesco, "a lot of customers find it a bit overwhelming and you are bombarded by information and you can't find what you want."

     
  5.  
    06:07: TESCO EARNINGS Radio 5 live
    A Tesco trolley

    "When the CEO is on gardening leave the chairman should step up and that's not happened," says Mr Roberts on Wake Up to Money, talking about the performance of Tesco chairman Sir Richard Broadbent. The supermarket discovered a £250m profit black hole. "I'd be remarkably surprised if it's limited to a 6-month period," he adds.

     
  6.  
    06:01: TESCO EARNINGS Radio 5 live

    Brian Roberts of Kantar Retail is on Wake Up to Money talking about Tesco's results, out today. "There's lots of hoops you have to jump through" as a shopper at Tesco, he says. Buy one get one free, the loyalty card, driving a car and buying the petrol. "With Aldi you just have to turn up... Tesco used to have the shopper at the centre of the business and now they've replaced the shopper with the shareholder."

     
  7.  
    06:00: Howard Mustoe Business reporter

    Good morning. Get in touch via email bizlivepage@bbc.co.uk and twitter @BBCBusiness

     
  8.  
    06:00: Matthew West Business reporter

    Morning all. Now we could try and pretend that there is other news going on (and in fairness there is some) but let's face it, the focus today is all going to be on Tesco's half year results. We'll bring you them as soon as they drop, plus all the reaction and the rest of the day's news as it happens.

     

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.