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Phasing out coal in Germany, Poland and the Czech Republic: coordinated energy policies are needed

Phasing out coal from the electricity sector is the most important step to reach the Paris Agreement’s goal. Especially, in what has been defined as Europe’s coal triangle: Germany, Poland and the Czech Republic. Germany and Poland alone are jointly responsible for more than half of the European Union’s installed coal capacity and emissions from coal.

As of today, Germany’s Coal Commission has already decided to phase-out coal by 2038. The Czech Republic has also established a Commission, similar to the German one. And, as reminded by Frans Timmermans, Vice President of the European Commission, in a recent interview with CEENERGYNEWS, in Poland the debate has just started. With the new Energy Strategy proposed for 2040, the country could reduce its reliance on coal to 10 per cent (from over 70 per cent of today).

According to the report Modernising the European lignite triangle, published by German think tank Agora Energiewende and Polish think tank Forum Energii, an earlier coal phase-out (by 2032) will not bring an increase in the costs of power generation in the region.

“The decline of lignite is inevitable because of costs’ and resources’ reasons,” commented Joanna Maćkowiak-Pandera, Forum Energii’s CEO, during the online launch of the report. “It is not a very easy task but the security of supply in the region can be ensured even if we speed up the phase-out process.”

As outlined in the study, lignite decommissioning in 2032 is the most ambitious scenario but also realistic at the same time. The difference in power production would be fully replaced by renewables assuming a 50-50 split between onshore wind and solar.

Is 2038 a late commitment for Germany?

Indeed, it sounded kind of strange for a country like Germany to phase-out coal only by 2038, beyond the 2030 deadline for all EU Member States. Not what can be expected from a country that already made so much towards the energy transition and the decarbonisation, including deciding to shut down all its nuclear power plants by 2022.

“This is a question that always comes to mind when you think what Germany is doing in other sectors,” notes Gaurav Ganti, Decarbonisation Strategies Lead at Climate Analytics, a Berlin-based non-profit climate science and policy institute. “The argument from the German government is that the delay in committing to an earlier phase-out date is due to the need to facilitate structural changes in the region. However, according to research, a faster lignite and coal phase-out, while resulting in higher short-term impact would result in helping the economy recovering much faster.”

Furthermore, there is also a significant price pressure from renewables that are not only cost-competitive but also cheaper, therefore coal becomes an unprofitable option.

“There are countries, like Sweden, that phased out coal much faster, before their targeted phase-out date given the impacts of COVID-19,” he tells CEENERGYNEWS. “Some others are expected to meet their targets. But most of the countries are reconsidering old policies anyway, checking if their future projections of coal use in the energy system are realistic. This means the window of opportunity for coal phase-out policies is wide open and it can be a win-win situation without any cost when it comes to ensuring energy security.”

For Luke Haywood, researcher in the working group Sustainable Resource Management and Global Change at the Mercator Research Institute on Global Commons and Climate Change (MCC), Germany’s coal exit law stipulates a latest exit date but an earlier one is definitely possible.

“The maximum exit date is not set at 2038 yet – there will be several reviews concerning the safety of electricity provision and an alternative, earlier, date of 2035 is in the law,” he explains. “My subjective view is that it is extremely unlikely there will be any coal-fired power plants operating beyond 2035 because I am optimistic that in the next 10 years renewable electricity capacity can make up for shortfalls due to reductions in coal and nuclear capacity.”

Yet, he reminds us that the market-based mechanisms still apply.

“The coal exit law does not prevent plant owners from paying for emissions under the EU-ETS scheme,” Mr Haywood tells CEENERGYNEWS. “The electricity prices have been very low over the last years, the continued production is seen by many as a gamble on rising prices as a result of the retirement of coal-fired power plants and nuclear power plants. And, for the moment, COVID-19 has created an additional problem for the economics of coal-fired power plants.”

According to him, if the German government were to change their policies, an earlier exit may be possible as a result of, for example, a national CO2-price (higher than the price implied by the EU-ETS-scheme).

“The law is not 100 per cent clear on this point – in my mind – and people differ on the interpretation here,” he adds. “Importantly, the compensation paid to the coal industry (in exchange for exiting earlier than their operating licences allow them to) are not conditional on them operating until the maximum final date.”

The impact of next year’s elections

Next October, Germany will elect a new federal parliament. Chancellor Angela Merkel has backed the European Commission’s proposal to increase the bloc’s climate target to a 55 per cent greenhouse gas reduction by 2030. Whoever will succeed her, will have to lead Germany through complicated times, with the COVID-19 still looming and the climate neutrality target approaching fast.

Mr Haywood believes that the key player here will be the Green Party, that may enter government after the elections.

“The Green Party was very critical of the coal exit deal, but – given their support is necessary for the second chamber of parliament – voted for (parts) of it in the end,” he says. “My impression is that they will not go against the basic principles of the coal exit law. However, they could make coal unattractive economically. How successful they will be in this, I do not know. This depends on many factors, especially the degree of renewables deployment not only in Germany but across Europe, given the integrated grid. Poland and the Czech Republic could make it easier if they move fast to more renewables.”

Coordinated energy policies

Both Agora Energiewende and Forum Energii underlined that looking at national phase-out plans individually is not enough, since the interconnected EU energy systems are interdependent. The move away from coal in one country may not lead to a drop in emissions if neighbouring countries continue to produce energy from coal.

“Germany is important to the debate in Poland and the Czech Republic, not only because it is a neighbouring country but also it has a role in providing a good template,” says Mr Ganti. “The learnings from the coal commission in Germany can provide a template for other countries and some lessons that can be transferred. A positive aspect is that the coal commission was really inclusive because it included different stakeholders.”

Mr Haywood has some mixed feelings in this regard. On one hand, he thinks that there was insufficient consideration of the costs and that certain decisions favoured the coal companies very strongly in ways that were not transparent and understood.“

“On a positive note, I think it does make a lot of sense to focus on regional development,” he adds. “Many sensible projects were discussed and financed as a result of the coal exit plan: railways, roads, government agencies, university financing. All these things may not create immediate alternatives for coal workers, but the large majority of these will leave to early retirement. So the challenge is to find jobs for the next generation and revenues for local and regional governments.”

To him actually, Poland’s lack of an exit date is not necessarily a bad thing when compared to Germany’s potential exit date of 2038.

“I don’t know of any country worldwide that has set a later date,” he points out. “Given that Poland has agreed to the vision of a net-zero EU by 2050 it is clear that coal will come to an end in Poland also. So Poland’s position is not necessarily less progressive than Germany’s.”

Ensure the security of supply

There is also the fact of what will happen to the security of supply. There are numerous alternatives to coal and their development is gaining momentum.

“A future based on renewables is economically feasible and there are positive developments also on the battery storage front,” says Mr Ganti. “There should be a larger focus on hydrogen which can help meet the climate targets. There is a portfolio of options, of which green hydrogen is one.”

Coal is also a significant economic driver, providing jobs to around 230,000 people in mines and power plants across 31 regions and 11 countries. 

“Europeans are supporting the energy transition because they know it will bring a better and healthier lifestyle, a green environment, greener air and qualified jobs,” commented Catharina Sikow-Magny, Director of the Internal Energy Market at DG ENER at the European Commission, during an online event organised by Hungary’s Regional Centre for Energy Policy Research (REKK). “But citizens also know that there are negative consequences. Those people who work in certain sectors and live in certain regions know that the transition will have a negative impact if not addressed in the right way. Yes, some jobs will disappear but new will be created and will give new opportunities. Coal mines will close but the lands can be reclaimed for many other types of economic activity.”

Germany, like other countries, has the ambition of securing all its electricity requirements from renewables.

“Currently, there is an imbalance between the renewable energy, with more produced in the North and North-East and relatively less in the South,” underlines Mr Haywood. “Furthermore, while in the South, we have more PV, in the North we have more wind, for obvious geographic reasons. The plan is to balance this a little bit. A relevant question, in particular, relates to the security of supply when renewable resources are low.”

The Modernising the European lignite triangle report finds that the amount of electricity produced from natural gas will need to increase somewhat. But the use of natural gas must still be reduced to achieve climate neutrality. Investing in natural gas is only justified if it can be replaced by green gas in the future.

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