German Economy Minister Sigmar Gabriel said 13 percent of power
stations burning lignite, a cheap form of coal, would be phased out by
2021 under a program to cut power industry pollution. The government
abandoned talks on proposals to impose a climate-change fee that the
industry said would have forced mines and plants to close, threatening
jobs.
The decision, which must be ratified by Chancellor Angela Merkel’s
cabinet this year, boosted the shares of utilities including RWE AG and
EON SE. They had been braced for more stringent measures as Germany cuts
emissions in time for a United Nations deal on global warming in
December.
“We consider this a great relief for RWE as the climate- change fee
could have proved far more harmful to the company’s brown coal-exposed
power generation portfolio,” Tanja Markloff, an analyst at Commerzbank
AG who upgraded RWE to buy Thursday, said in an e-mailed note. RWE surged as much as 6.4 percent, the most since January, and EON by
3.7 percent, making them among the biggest gainers on Germany’s
benchmark DAX index.
Levy Averted
Instead of imposing the levy, Germany will put 2.7 gigawatts of
lignite-fired plants into a power-capacity reserve from 2017, and close
them after four years. The reserve will enable the plants to operate
when supplies are short, although the facilities won’t be allowed to
sell power on the market.
That would lead to a reduction in carbon-dioxide emissions of 11
million metric tons a year, the Economy Ministry estimated. The lignite
industry agreed to cut an additional 1.5 million tons a year from 2018
in a way that still needs to be negotiated. The previous plan, promoted
by Gabriel, would have cut at least 16 million tons of emissions through
a levy that was designed to make burning coal less profitable.
Gabriel said measures to boost energy efficiency will save a further
11 million tons of carbon. Total savings of about 22 million tons
represent about 2.8 percent of Germany’s annual carbon emissions,
according to BP Plc data. The reserve system will cost an estimated 230 million euros ($255
million) a year, Gabriel said. Either way, utilities can’t afford to
cling to coal energy because Germany will have to cut 200 million tons
of carbon by 2030, he said. “The real challenge is still ahead of us,”
Gabriel told reporters in Berlin. “We will have to start talking about
it this year.”
Political Balance
The agreement ends months of debate within the government about how
to curb gains in coal use and balance the needs of the environment
against the tens of thousands of people employed by traditional
utilities. The compromise is an “appropriate way” to reach climate targets, RWE
spokeswoman Stephanie Schunck said by phone from Essen. While it will
lead to job cuts, the company’s three opencast lignite mines will be
able to stay open, she said. RWE doesn’t yet know how many of its
lignite plants will join the capacity reserve, Schunck said.
Merkel’s government is under pressure to rein in coal as the European
Union works toward cutting greenhouse gases, part of a global deal on
climate change that the UN is pushing to conclude in Paris at the end of
this year. With Germany already committed to closing all nuclear
reactors by 2022, the nation is seeking alternatives to make up for lost
supplies.
Lignite’s Future
The country’s lignite plants generated 25.4 percent of German power
last year, second only to renewables with 26.2 percent, according to AG
Energiebilanzen. Hard coal accounted for 18 percent.
Coal and specifically lignite, the most polluting form of the fuel,
got a boost in recent years as the first nuclear plants were switched
off. Merkel’s ambition is to stimulate renewable forms of energy,
especially solar farms and offshore wind plants in the North Sea, as a
replacement.
That program has started to draw criticism. Businesses are concerned
that power bills will rise, and residents are upset about the blight on
landscapes caused by high-voltage power lines needed to link wind farms
to industrial regions.
As part of Thursday’s deal, the government agreed with state leaders
including Bavaria’s Horst Seehofer to prioritize underground cables when
adding new power lines instead of opting for massive new pylons. Environmental groups including Greenpeace said Merkel failed to honor
a pledge to protect the climate made at a Group of Seven nations
meeting in Bavaria in June. “Instead of starting the phase-out of coal as promised, the
chancellor realizes all the dreams of power plant operators,” Tobias
Muenchmeyer, a Greenpeace activist, said in an e-mailed statement. “They
have to cut less CO2 and are even given billions for it.”
Copyright 2015 Bloomberg
http://www.renewableenergyworld.com/news/2015/07/germany-gives-dirtiest-coal-plants-six-years-for-phase-out.html