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Germany Restarts Coal-Fired Power Generation to Replace 1-2% of Gas-Fired Generation

published: 2022-08-19 9:30

Germany is one of the leading countries in promoting carbon reduction. In the second half of her term, Merkel had largely eliminated reliance on coal-fired power generation. Coupled with its nuclear abolition policy after Japan’s 311 incident, energy is highly dependent on natural gas. Now the Russian-Ukrainian war has put the supply of natural gas into crisis, so Germany has returned to call on these obsolete coal-fired power plants, hoping to restart them as a delaying tactic, but restarting is not as simple as flipping a switch.

In response to the natural gas energy crisis, Germany has allowed the restarting of decommissioned coal-fired power plants, which were originally scheduled to close in 2022 and 2023. As long as Germany remains in the second "warning phase" of the gas emergency plan these plants can continue to join the electricity market to sell electricity to earn revenue, hoping to replace 1% to 2% of natural gas consumption. The proportion of German electricity from gas-fired power generation will be 10.4% in 2021, while the power generation rate from natural gas consumption will be about 6%.

This the situation in theory, but in reality power companies are either unwilling to restart coal-fired power plants, or willing to but have difficulty obtaining the necessary coal. Germany's federal economy ministry had expected 16 coal-fired power plants to be restarted or closing postponed, but only one was reconnected to the grid. Eight are owned by the southern German power company Energie Baden-Württemberg AG (EnBW), which said most were too old to be reconnected to the grid, and only one of them, which was scheduled to shut down in October, can have its closure delayed. Uniper said it had not yet decided to partially reopen coal-fired power plants.

Instead, German chemical industry company Evonik said it would reopen a coal-fired power plant, but only in the fall. Steag, a German power company that operates 11 coal-fired power plants, said it has plans to restart coal-fired power plants, but faces coal supply problems. Due to the sharp rise in international coal prices, purchasing coal has become a considerable burden, and coal-fired power generation has to spent money first. Money is used to buy coal, and after electricity is generated, revenue from electricity sales in the electricity market is recovered. With a sharp rise in coal prices, business is lacking interest.

Coal shipments also face serious obstacles, with low water levels on major rivers due to drought in Germany, and river shipments plummeting, while rail shipments are crammed with Ukrainian grain that has been blocked by sea and is traveling over land instead. Coal transportation is facing bottlenecks, and the problem will intensify. Even if power companies are willing to spend a lot of money on coal, they may not be able to buy enough with the transportation bottleneck.

The more fundamental point is that the German government will eventually eliminate coal-fired power generation. Now "extra-legal grace" says that electricity can be sold temporarily. The power company has to invest time and money, and the result is plants may only be able to operate for one more year. The return on investment is simply not worth it. The German government's lingering attitude as the power company sees it, is of course to close the plants as originally planned. After all, a for-profit business is not a charitable business. If Germany really wants to rely on coal-fired power generation to solve the energy crisis, the design of policy incentives will have to be more attractive.


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