To meet emission targets, countries around the world will have to clean up their most polluting industries. In Germany, that means ditching coal-fired power stations, but it turns out that may be easier said than done, according to new research from EnAppSys.
In fact, while Germany currently plans to phase out coal completely by the end of 2038, with the aim of bringing this forward to 2035, the country is putting its entire grid at risk. This is because coal is currently so strongly entrenched in German energy systems that a total withdrawal of it by this date will need to clear some pretty steep hurdles.
Jean-Paul Harreman, director of EnAppSys BV, commented, “Germany has a long history of coal which drove the growth of one of the most powerful industries of the world for decades. Although in recent years the industry has seen significant decline, coal and lignite still make up a significant proportion of Germany’s fuel mix today.
“Significant growth in renewable capacity will be required to replace planned closures of coal, lignite and nuclear capacity. Current subsidy arrangements for a significant tranche of existing renewable capacity will expire shortly and the continued operation of those units may no longer be economically viable without further subsidy.”
Germany is not exactly the most bullish when it comes to rolling out renewables. The country has promised to transform its electricity supply to 100% renewables by 2050. In comparison, Scotland is already on course to hit that target within the next few years.
One of the reasons behind the slow roll-out of renewables in Germany is the lack of Government support.
The Federal Audit Centre (Bundesrechnungshof) has accused the government of failing to run an economically feasible Energiewende (transition to a low-carbon economy), stating that the associated phase-out plans are endangering the competitive edge of the German industry and security of supply. Indeed, there are widespread concerns that the plan to increase renewables’ share of the fuel mix to 65% will not be met.
Of course, before renewables can take the strain, the country will need to start slowly phasing out coal. The problem in Germany is that they’ve already done that, having shut down some power stations last December. Unfortunately, the grid couldn’t handle the demand without the coal power plants that had been shut down, forcing the Heyden power plant (875 MW) to be brought back to meet the demand in cold weeks six times in the past months.
“Security of supply was tight last winter – plants that had been closed down had to be brought back into service to meet demand – and this pattern could be repeated more regularly in future, triggering potentially steep price rises,” added Harreman.
“By current estimations, there will be a need for around 18GW of additional gas capacity to fill the gap after the phase-outs and enable the planned renewable integration by 2030. Germany currently imports 93% of its gas supplies, mainly from Russia, The Netherlands and Norway, but Dutch gas will be seriously reduced, if not completely, due to the termination of the activities in the Groningen field by 2022. This will increase the need to diversify power supplies, otherwise security of supply could be seriously affected.”
Another issue for Germany is the fact that many of its coal plants have only just begun operation. The new 1.1GW Datteln 4 coal plant was commissioned and began operation in 2020 and is expected to continue operation until 2038, that means Germany couldn’t speed up its decarbonisation plans even if it wanted to.
The blame for extreme system prices usually rests on the shoulders of renewables rather than on market design. Currently there is so much concern about meeting demand in power markets after the phase-outs that not much attention has been paid to narrowing spinning reserves and qualified volumes for aFRR and mFRR, two key components of Germany’s balancing market.
Harreman concluded, “According to September 2020 data, hard coal, lignite and nuclear make up a large portion of the qualified capacity to deliver FCR (23%), aFRR (12%) and mFRR (28%). Following the coal and nuclear phase-out, this capacity will have to be delivered by other assets. It’s expected that gas will need to step into the aFRR and mFRR markets and batteries will deliver more FCR, but at the speed things are going to change, this may come with temporary scarcity of capacity and associated higher availability prices.”