CURRENT EUROPEAN CARBON PRICE WILL FORCE CLOSURE OF HALF GERMAN COAL POWER PLANTS BY 2030

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11 september 2018

ETS on track to close half Germany’s coal fleet – expert

Nathan Witkop, Montel, September 11, 2018

(Montel) European carbon prices have reached levels high enough to force the closure of half of Germany's coal fleet by 2030, an expert advisor to the German government said on Tuesday.
The EU’s biggest carbon emitter would close 15-25 GW of coal-fired generation capacity on economic grounds alone if the benchmark CO2 price remained above its current level of around EUR 25/t, said Andreas Löschel, an economist at the University of Münster.

Carbon prices have more than quadrupled over the past 12 months, reaching fresh 10-year highs – above EUR 25/t – this week.

“We are already seeing fuel switches from old coal plants to newer gas plants. This is going to intensify if these prices stay [this] high or increase over time,” Löschel told Montel on the sidelines of the German energy congress in Munich.

However, without additional measures, Germany would still fall short of a climate goal to cut energy sector emissions 61% below 1990 levels by 2030, he said. “Even with half of the [coal] capacities phased out, there is still a gap.”

Germany would need to close an additional 6-18 GW of coal capacity and achieve ambitious plans to raise renewable energy to 65% of the power mix to reach this sectoral target, he said.

Löschel recently presented his views behind closed doors to Germany’s coal commission, a government-backed body that will recommend later this year or early next how and when the country might be able to phase out coal-fired capacity fairly.

“The coal commission is pretty much fixed on a regulated phaseout,” Löschel told Montel. “If this is not accompanied by [CO2] price signals, this is not going to do the job.”

Timetable


Closing coal plants according to a timetable – much like the country’s planned exit from nuclear power by 2022 – would probably increase operating hours for those presently-underutilised coal plants allowed to remain in the market, Löschel said.

This would keep German emissions elevated, unless accompanied by a clear CO2-price signal, he added.

He appealed for a carbon floor price of EUR 20/t to send a signal about the long-term economic prospects of coal-fired generation.

By contrast, utilities were likely holding off the closure of aging assets at present in the hope of winning compensation payments to do so.

Germany has already paid utilities to place 2.7 GW of ageing lignite units in an energy security reserve in a bid to expedite some emissions reductions before 2020. Some have suggested extending this model to get affected utilities to support further plant closures.

“Germany has made some very bad signals in this respect,” said Löschel.

Löschel heads Germany’s energy transition monitoring commission, which reports annually on the country’s progress towards switching to an energy system centred around renewables by 2050.

Thierry Bros, senior research fellow at the Oxford Institute for Energy Studies, also said Germany should push for more coal-fired power plant closures as the recent surge in carbon prices makes the most polluting energy less competitive.

“CO2 prices are now at a record level over a period of two years,” he told Euractiv in an interview published earlier on Tuesday. “It is time for Germany to try to understand it has to close down a few coal power plants.”


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