German coalition eyes 2030 coal exit, years ahead of plan

A potential new SPD-led German government wants to abandon coal as a power source eight years earlier than planned, a move that would be a big win for the planet but a challenge for a country already struggling with energy supplies.

“In order to reach the climate goals, an earlier exit from coal-fired power is needed, ideally by 2030,” the parties wrote as they set out basic principles for an alliance.

Details of how Europe’s largest economy plans to shed its reliance on coal will be hammered out in formal talks between the Social Democratic Party, the Greens and the Free Democrats set to start as early as this week. An accelerated expansion of energy from renewable sources like wind and solar is likely to be part of the plan.

The move isn’t without risks. Under conservative Chancellor Angela Merkel, Germany has moved to shut down nuclear plants, and hasn’t sufficiently invested yet in alternatives. Utilities warn that the risk of blackouts is set to grow as electrification adds to demand for power. Germany’s reliance on gas is likely to increase at a time when that fossil fuel is coming under increased scrutiny by investors and voters alike because of its emissions.

The need for additional power could be “massive,” said Emma Champio, BloombergNEF analyst covering policy related to the energy transition. “An accelerated coal phase-out plan will also need to be coupled with new incentives for clean dispatchable capacity that can comply with a net-zero economy in the longer term.”

The Green Party made an earlier exit from coal one of its core pledges ahead of the September election, as a step toward reaching carbon neutrality in Germany by 2045.

Climate policy has become a priority throughout the European Union, with the bloc seeking to curb its greenhouse gas emissions by 55 per cent by the end of this decade, compared with 1990 levels. 

A faster exit from coal in Germany might also be encouraged by market forces, since increasing carbon prices have made some plants unprofitable.

Phasing out coal by 2030 could potentially allow Germany to avoid 1.1 billion euros ($1.3 billion) a year in emission costs, according to a study by Wartsila Oyj. Yet it would require the country to boost its wind and solar capacity by about 20 per cent beyond what had been planned for the 2038 coal phase-out.

Germany’s outgoing government has been accused by critics of failing to expand alternative energy production quickly enough to meet its future power needs. 

After more than two decades of energy transition, coal still supplies almost a quarter of Germany’s electricity. Gas accounts for about 16 per cent of electricity production, according to estimates from AB Energiebilanzen e.V. for 2020.

“The main challenge is to produce ambitious policies to accelerate the roll out of solar and wind energy, and increase energy storage capacity, while ensuring that Germany doesn’t sleepwalk into the fossil gas trap,” said Mahi Sideridou, managing director at Europe Beyond Coal.

Still, Germany reaching 65 per cent of its energy mix from renewables by 2030 seems far-fetched, after a slump in onshore wind installations has brought the sector to a shuddering halt.

Friday’s coalition paper focused heavily on climate initiatives, a fact that Kerstin Andreae, chairwoman of the German Association of Energy and Water Industries, called “extremely positive.”

As well as the coal exit timetable, the parties said they plan to install solar panels on all new commercial buildings, and to end combustion-engine powered cars before 2035 by allowing only CO2 neutral cars to be registered on German streets.

The Liberals, who’ve been pushing for a more market-oriented climate policy, got backing for their plans to abolish Germany’s renewable energy surcharge within the next four years, and agreed to expand EU emission trading to airlines, road transport, shipping and buildings.

© 2021 Bloomberg L.P.

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