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The German coal industry caught in the crossfire between security of energy supply and environmental sustainability

Presentation to the German Mining Engineers’ Circle by Dipl.-Ing. Andreas-Peter Sitte, German Hard Coal Association, Essen Opening remarks: The current energy debate taking place in Germany centres around the need for a reliable and forward-looking concept for future energy supplies. In addition to the environmental constraints and other framework conditions being laid down by the international community and European Union of states we also need to take account of various national considerations that still have an important role to play, including security of supply, efficiency and technology leadership. And it is security of supply that still dominates the headlines.

Coal plough (underground)

Recently we have seen how dramatic increases in the world-market prices of coke and coking coal can threaten coke supplies to the metallurgical industry, and before this there were last year’s power cuts that disrupted electricity supplies in the USA, Canada, Sweden, Denmark, the UK, Italy, Austria and the Czech Republic. A sober evaluation of the situation indicates that while there are certainly obstacles to coal’s future use as a fuel, the overall picture suggests no reason to be pessimistic.

Allow me at this juncture to define the scope of my presentation today. It is my intention to outline the future prospects for the solid-fuel industry in Germany, in other words the mining of coal and lignite – two fuels that together constitute the mainstay of our national power supply. As lignite is destined exclusively for power generation purposes, and with sales of German-mined coal to the steel industry now only constituting about 25% of total revenue – whereas 73% of production is consumed in power stations – I shall be restricting my remarks to this particular sector. In many respects the arguments being put forward here can also be applied to the coking coal sector.

At present the German electricity market is subject to a different set of rules from those that applied just few years ago. Then the regulated marketplace meant that costs dictated prices, though admittedly with a certain mark-up. In today’s liberalised and extensively deregulated markets it is supply shortages that count. In the deregulated market short-term price fluctuations make it more difficult to determine long-term trends and mean that price estimates do not generally gain credence. Investments are tied to a much higher risk level than before, with the result that capital is more difficult to attract.

Even though people are essentially convinced of the fact that we need additional coal-fired generating capacity, it is still not clear how far retrofit measures can be introduced and how long investment decisions can be postponed, neither can we say for certain what the long-term results will be of the CO₂ debate and the measures that will follow-on from it.

Turn it and tist it as you will, the CO₂ argument could have huge explosive power. Certainly there is clearly no majority support for a ‘decarbonisation’ of the power supply industry or for an electricity make-up solely based on renewables in the regulated market and on gas-fired combined-cycle power stations in the deregulated sector. It appears that no-one is in favour of de-industrialisation in Germany.

Status quo and forecasts for coal-based power generation.

Link to Figure 2: Status quo and forecasts for coal-based power generation http://www.steinkohleportal.de/medien/other/20040723101317.pdf

Status-quo projections indicate that coal-based electricity generation has a great future – in Germany, in Europe and all over the world.

In 2002 German electricity consumption totalled some 582 TWh, of which 135 TWh (23%) was coal based and 159 TWh (27%) lignite based. This means that half of all the electricity generated here comes from solid fuels. For the Community of Fifteen the figure is 26% and for the enlarged EU-25 32%. On a global level solid fuel is still the ‘number one’ for power generation, with an average 38% share of the power-station market. In many countries, such as the USA, China, India and Poland, coal’s contribution to power generation is even much higher than this.

Link to Figure 3: Coal’s contribution to electricity generation.
http://www.steinkohleportal.de/medien/other/20040723101750.pdf

Link to Figure 4: Long-term status-quo projections.
http://www.steinkohleportal.de/medien/other/20040723103757.pdf

In its ‘Lignite Study 2002’ the Prognos Institute came to the same conclusion, as did ESSO in its most recent industry projection: with power consumption only increasingly slightly in the long term – a rise of just about 2% a year is being predicted for the period up to 2040 – coal and lignite are expected to have a 30% and 34% share respectively of the German energy market. The energy projections for the EU-25, as put forward by GD TREN (Directorate General for Energy and Transport) in the autumn of 2003, predict that coal’s share of the generating market will initially fall Europe-wide to around 21% by 2010, but will then recover strongly to reach a figure of 27% by 2030 – well ahead of nuclear! An finally, in its World Energy Outlook 2002 the IEA even predicts that by the year 2030 coal’s contribution to electricity production will have stabilised-out at around 36 to 37% of the total market – with a simultaneous growth in electricity generation of 95%.

Link to Figure 5: Assumptions from the status-quo projections.

http://www.steinkohleportal.de/medien/other/20040723105034.pdf

The status-quo projections are based on the assumption that Germany will meet its Kyoto commitments up to 2010 and also that the country will phase-out nuclear power as planned by 2020. They also suppose that there will be no more environmental restrictions but that further efficiency improvements and emission reductions will be achieved by way of the on-going modernisation of energy-related processes and that the energy mix will continue to be based on the equal-ranking objectives of competitiveness, security of supply and environmental sustainability. The EU is initially assuming that gas will lose market share and that after 2010 nuclear power plant will be replaced by coal-fired installations, which will also become increasingly competitive as gas prices rise and as technological improvements become available. According to the IEA coal will retain its advantages in terms of pricing and availability. ‘Clean coal technologies’ will also begin to assert themselves.

Taking the lead in emissions reduction.

Link to Figure 6: Germany – taking the lead in emissions reduction
http://www.steinkohleportal.de/medien/other/20040723110034.pdf

CO₂ makes up 29% (about 600 bn tonnes a year) of the total world production of greenhouse gases. Man-made CO₂ emissions account for 1.2% (about 28 bn t/a). Germany’s share of this is 0.03% and Germany’s CO₂ reduction target would relieve the atmospheric burden by 0.0075%.

Link to Figure 7: Actual CO₂ restrictions to date
http://www.steinkohleportal.de/medien/other/20040727101052.pdf

The stated objective of the former Kohl Government, namely to reduce Germany’s CO₂ emissions by 25% by the year 2005, is unlikely to be achieved and has been revised by the incoming ‘red-green’ Government. Germany’s share of the ‘burden sharing commitment’ as accepted by the EU at Kyoto, which provides for a 21% reduction in all greenhouse gases by 2012, is now well on the way to being achieved (19% reduction to date). In terms of CO₂ alone the reduction figure now stands at 15%. Germany is therefore leading the way in emissions reduction. Most of the other EU member states have significantly lower reduction targets and yet are well short of achieving their goals.

The Kyoto Protocol, as a basis for the national emissions reduction commitments, has still to be ratified and is therefore not legally binding. Russia, the USA and Australia are still refusing to accede to the agreement and other signatories, such as Japan, are nowhere near achieving their targets.

Link to Figure 8: Climate protection in the European Union. http://www.steinkohleportal.de/medien/other/20040723111154.pdf

Climate hypotheses will always be the subject of scientific criticism. However, at the present time it is politically correct to refer to the agreement as it stands. A modern coal-based power generation system for Germany fits in well with the already-agreed climate protection measures:

– According to the Kyoto targets German industry has accepted a voluntary set of environmental provisions.

– Moreover, there are various accompanying energy and environmental measures that do not directly involve CO₂ restrictions, such as the eco-tax, the Renewable Energies Act (EEG), the Co-generation Act (KWK) and the Plant Regulation Act. Germany can therefore meet its environmental targets without the emissions trading system with its CO₂ caps, which is currently being introduced.

A Government Coalition agreement of autumn 2002 has set targets for the period beyond 2012 and provides for a national CO₂ reduction of 40% by 2020, whereas the target for the rest of Europe is 30%. Even so, this is less than realistic given the general EU situation.

Green lobby challenges coal-industry prospects.

The Energy Report published by the Federal Ministry of the Economy at the end of 2001 warned of imbalances in the triangle of energy-policy objectives, especially that which seeks to achieve a 40% reduction in CO₂ by 2020. In addition to the macroeconomic costs this could lead to a significant narrowing of the fuel base and, more importantly, to an expansion in the use of (imported) gas at the expense of coal for electricity generation. Halving solid-fuel consumption overall – with coal usage being reduced by a massive 80% - combined with a 60% reduction in solid fuel’s share of the generation market would spell the end of indigenous coal mining.

Some environmental groups, including Greenpeace and the World Wildlife Fund (WWF), are even using climate issues as a reason to get out of coal mining altogether.

The scenarios for the period up to 2050, which were produced in 2002 by the Committee of Enquiry on ‘sustainable energy supply’ that was set up by the German Bundestag, predicts a somewhat mixed future for the coal industry.

For example the reference scenario ‘continuation of the current regulatory framework and trends’ predicts long-term growth perspectives for coal-based power generation in Germany. This contrasts with various ‘target scenarios’ that are based on reducing CO₂ emissions by 35% by the year 2020, by 50% by 2030, by 65% by 2040 and by 80% by 2050.

The target scenario ‘conversion efficiency’ also presents coal in a favourable light, provided we step-up efficiency levels and introduce CO₂ capture systems. The target scenarios ‘RRO’ (REG/REN offensive) and ‘fossil-nuclear energy mix’ (FNO), on the other hand, see coal being squeezed out by renewables and nuclear power to the point where solid fuel disappears from the scene completely by 2050.

The green lobby, which also includes the Federal Ministry for the Environment (BMU), has since adopted an approach on the lines of the RRO scenario, as has the Scientific Advisory Committee for Global Environmental Change (WBGU) in its most recent report ‘Energy U-turn for sustainability’ of April 2003, which even recommends the global phasing-out of coal mining by 2050.

If we focus on the German power generation industry in particular the German Institute for Economic Research (DIW) and the Eco-Institute have adopted the same line in a study carried out for the Greens in the German Bundestag, as has the Federal Environmental Agency (UBA) in its report ‘Requirements for future energy supplies’. Both studies are oriented purely on environmental policy and provide for a CO₂ reduction of 40% by 2020 and of 80% by 2050 by way of a national go-it-alone approach. There is no provision for new coal-fired power stations, not even as replacement for nuclear power plant. Instead, both reports propose taking the environmental course and even advocate the premature closure of existing lignite and coal-fired installations, claiming coal utilisation to be “not sustainable”.

In the context of a misleading (from a coal industry viewpoint) background paper opposing state aid to the mining industry the UBA even maintains that there are no studies to show that CO₂ emissions can be cost-effectively reduced by way of modern coal-based technologies.

Sustainability Advisory Panel takes up a differentiated position

At the end of 2003 the Advisory Panel for Sustainable Development, which was set up by the Federal Government, presented its views on the coal industry in a study entitled ‘Prospects for coal in a sustainable energy supply structure – guidelines for a modern coal policy and for the promotion of innovation’. In this report the Sustainability Advisory Panel seeks to illustrate the need for an overall energy strategy “using coal as a reference example”.

Of solid fuel in general the study says that this resource could switch from being “the environmental transgressor number-one to becoming an important constituent of a future sustainable energy supply”. Moreover, “by the middle of the century” the CO₂-free coal fired power station should be capable of meeting all the relevant climate-control requirements. Greater R&D and technology-transfer efforts were therefore required as a matter of some urgency in the areas of ‘clean coal’ and ‘sequestration’. The Sustainability Advisory Panel is therefore now calling on coal-policy makers to launch a technology offensive rather than relying on substitution strategies.

Positions adopted by the political parties

‘Agenda 2010’ – which outlines the SPD energy policy – considers that environmental constraints and scarcity of resources will eventually force us to stop using fossil-based energies altogether. Energy productivity therefore has to be systematically improved in every sector in parallel with a continuous expansion of renewables’ use. This will initially require finding replacements for oil and gas. Coal will still be needed until the end of the century. Indigenous fossil fuels, which primarily means solid fuel, will also play an important role in the energy mix “in the decades ahead”. Increasingly efficient, climate-compatible technologies would be put in place for coal-based electricity generation. This will involve the launching of a “coordinated research offensive” for low-CO₂ and CO₂-free power stations on the ‘clean coal’ model and will require close collaboration between public authorities and industry.

The Greens, in outlining the key points of their energy reform programme, implicitly recognised coal utilisation as a reality, stating that coal would be “needed” in the years ahead as part of the German energy mix. Of course they do not advocate an expansion of coal-fired generating capacity and have taken a somewhat sceptical approach to ‘clean coal’ and to the CO₂-free power station – referring to technical and economic shortcomings, an absence of tried and tested technology and the fact that such systems could not be part of the next investment cycle. Yet the Greens are now adopting an even more critical attitude to oil (in their ‘no more oil’ strategy) and also to gas (‘transition energy’).

The CDU and FDP prefer an energy mix with coal and/or clean coal technology as global objectives and are not as yet planning to impose specific restrictions on coal-based power generation.

Policy argument in the Federal Government settled

Last summer the headlines were full of the departmental argument over energy policy between the Environment Ministry (BMU) and the Ministry of Economics and Labour (BMWA). Issues at stake included coal, renewable energies – especially wind power – and the 40-GW shortfall in power generating capacity that is being predicted by the year 2020.

Link to Figure 9: Electricity generating capacity in Germany
http://www.steinkohle-portal.de/medien/other/20040726141112.pdf

The BMU strategy paper advocated that the energy-supply gap created following the phasing-out of nuclear power should be filled not by building new coal-fired power stations but by using a mix of renewable energies – notably wind power – plus gas and a programme of energy-saving measures. ‘Clean coal’ was only to act as a possible transition energy during the decentralisation and decarbonisation of the power generating industry. Fossil-based resources would only be used when there were no alternatives available. The BMU was explicit in its support for ongoing national emissions-reduction targets such as those proposed by the Bundestag Committee of Enquiry, which called for a 40% reduction in CO_s by 2020 and an 80% reduction by 2050.

The BMWA position was against any withdrawal from coal and nuclear power. Coal would remain part of the energy mix, especially for electricity production. Clean coal technologies should be promoted by way of research and development activities and further CO₂ reduction targets were rejected.

The Chancellor did advocate support for an ambitious environmental policy and agreed with British Prime Minister Tony Blair’s proposal for the long-term reduction of CO₂ emissions from the industrialised nations, which called for a 65% cutback by 2050. However, he has repeatedly stated on a number of occasions – to the Sustainability Advisory Panel, to the German Electricity Association (VDEW) and at the German Coal Day – that he considers coal to be an indispensable part of the national energy mix. He has also said that competitively-priced coal and lignite fired power stations would remain “the mainstay of indigenous power generation for many years”. Investment in higher-efficiency plant and clean coal utilisation was needed as a contribution to climate protection, and according to the Chancellor this would help coal become part of a sustainable energy supply structure. Moreover, modern German coal technology – and this meant power plant as well as mining machinery – had to be harnessed and exploited worldwide. The various departments concerned were now fairly well agreed on this point.

Link to Figure 10: Interim conclusions
http://www.steinkohle-portal.de/medien/other/20040726141757.pdf

The following interim conclusions can therefore be drawn:

1. Even assuming relatively drastic reductions in CO₂ emission levels, various assessments are made of the long-term prospects for coal - some are optimistic and present the situation as a challenge for further development.

2. In political terms no immediate restrictions are anticipated.

3. Once we depart from a purely environmental and narrowly national view and begin to include the other central objectives of energy policy, namely competitiveness and security of supply, there will be no getting around coal as the key fuel for power generation for many years to come.

4. Any response to the environmental challenge can therefore only come in the form of a technology offensive for coal, as illustrated by a brief examination of specific CO₂ avoidance costs.

Link to Figure 11: CO₂ avoidance costs
http://www.steinkohleportal.de/medien/other/20040726142015.pdf

Such a technology offensive has already begun in various areas.

The COORETEC initiative launched by the BMWA

Link to Figure 12: Clean Coal Initiatives (1/6)
http://www.steinkohleportal.de/medien/other/20040727081146.pdf

In 2002 the Federal Ministry of Economics and Labour launched the COORETEC initiative (CO₂ reduction technologies) as a means of producing a research and development plan for low-emission coal fired power stations. This initiative, which focuses primarily on coal-based power generation in Germany, has been structured around progressive time horizons and development levels to create three main objectives:

– Relatively quick and effective emission reduction measures over the next few decades by way of the global propagation of ‘state of the art coal technologies’.

– Medium and long-term efficiency improvements through the introduction of better materials, processes and components from the latest technological developments.

– Long-term implementation of the emission-free power station based on CO₂ capture and storage. All this will require intensive research and development work.

NRW reference power station

Link to Figure 13: Clean Coal Initiatives (2/6)
http://www.steinkohleportal.de/medien/other/20040727081354.pdf

The regional Government of North Rhine-Westphalia has now launched the project to build a ‘new generation’ coal-fired reference power station. The aims are to achieve efficiency rates of 46 to 48% and to commission such a plant somewhere in the Ruhr area before 2010.

This joint venture is supported by regional funding and involves a number of power-plant builders (Siemens, Babcock) and operators (E.ON, RWE, STEAG, Mark-E) from the North Rhine-Westphalia area. It is being coordinated by VGB Power Tech and will be assisted by the regional Government and by various scientific institutes (RWI, Wuppertal Institute and the University of Essen/Prof. Schmitt).

The first results obtained from the assessment study suggest excellent prospects for economic viability – based on a 600 MW plant – along with a huge export potential and significant employment opportunities for the region. The application to build a plant of this kind is expected to be submitted sometime this year. STEAG, for example, already has access to a number of approved sites.

Link to Figure 14: Power station sites in the Rhine and Ruhr area http://www.steinkohleportal.de/medien/other/20040727081535.pdf

The STEAG-developed CCEC concept

Link to Figure 15: Clean Coal Initiatives (3/6)
http://www.steinkohleportal.de/medien/other/20040727081714.pdf

As Germany’s second-largest coal-fired power plant operator, and – still – an international ‘independent power producer’ (IPP), STEAG AG sees real prospects for coal in the medium to long term, which essentially means the period from 2020 to 2050. The company expects replacement and new demand for coal-fired plant alone to be somewhere between 10 and 15 GW for the base-load and middle-load range by the year 2020.

And when all aspects of sustainability and market requirements – which means ‘lowest cost of ownership’ – are taken into consideration STEAG considers the CCEC project (Clean Competitive Electricity Coal Power Station) to be the latest entrepreneurial response to the needs of this period.

Link to Figure 16: The CCEC concept from STEAG AG
http://www.steinkohleportal.de/medien/other/20040727090333.pdf

The aim is to achieve efficiency rates of about 45% ‘in everyday service’ for 400 MW or 750 MW twin generating units, based on competitive investment and operating costs. This is to be attained by a process of standardisation and modularisation that will make for short construction periods and favourable maintenance and overhaul regimes based on tried and tested technology.

And STEAG is not the only company pressing ahead with technical development. Its activities in the field of coal-fired power stations are well known. RWE Power has now built a lignite-fuelled installation at Niederaussem that features optimised plant engineering (the BoA power station) and is designed for an efficiency level of 43 %. And another BoA plant is now on the drawing board.

The US ‘FutureGen’ Clean Coal Programme/Project.

Figure 17: Clean Coal Initiative (4/6)
http://www.steinkohleportal.de/medien/other/20040727090521.pdf

While Germany’s research-based Clean Coal Initiatives are still at the concept stage and the entrepreneurial activities are based primarily on state-of-the-art technology, the USA has already launched a comprehensive research and development programme that by 2020 should result in an almost CO₂-free coal fired power station. The American Ministry of Energy (DoE) has given the go-ahead for the ‘FutureGen’ project as part of a much-broader based Clean Energy Programme that is 80% state funded to the tune of nearly two billion dollars. The FutureGen project, which seeks to develop the prototype of a new industrially-viable coal fired power station technology, involves the largest electricity utilities and coal mining companies in the USA, including RAG AmericanCoal.

The basic technology is based on coal gasification and the aim is to attain an efficiency rate of 60% with 90% CO₂ separation. As well as generating electricity the system will also produce hydrogen for a variety of uses, which will also include powering fuel cells for transport purposes. Electricity costs are expected to be only 10% above that of current technology.

Europe Initiative. Link to Figure 18: Clean Coal Initiatives (5/6) http://www.steinkohleportal.de/medien/other/20040727090934.pdf

In order to tie-in to the work being done in the USA and elsewhere, including in Japan, the European Parliament and European Energy Foundation have recently been advocating support for the ‘Clean Coal for Europe’ research programme to be included within the scope of the next European Research Framework Programme. The funding provided from the EU energy research budget for Clean Coal Technologies is considered to be insufficient and the constant references to energy saving measures and renewable energies are regarded as inadequate for a really effective climate protection policy. The view expressed is that it is much more important to introduce cost-effective measures for CO₂ reduction as quickly as possible, which means improving efficiency in the use of fossil energies, and especially coal. According to the German MEP Rolf Linkohr this requires a “spirited initiative” on the part of the EU. The Commission has now expressed its support for this project, as has the European coal industry in the shape of its lobby organisation Euracoal. It remains to be seen whether these proposals will be implemented or not.

Carbon Sequestration Leadership Forum – CSLF. Link to Figure 19: Clean Coal Initiative (6/6) http://www.steinkohleportal.de/medien/other/20040727092116.pdf

But another project is already up and running: In June 2003 an international joint initiative was launched in Washington under the name ‘Carbon Sequestration Leadership Forum’ (CSLF). This project involves the USA and many other countries - especially the coal producing nations – and has the official participation of the EU as represented by Energy Commissioner Loyola de Palacio and a number of EU member states. The aim of the CSLF is to coordinate research, development and technology transfer activities in the field of CO₂ capture and storage. Naturally there are still many unresolved questions and the cost of sequestration, which means ‘capture and storage’, is put at some fifty dollars a tonne, a fact which would result in a twofold increase in coal prices. Nevertheless, real progress at international level is anticipated in this area in the medium and long term. The World Coal Institute is therefore already talking about “a way forward” for the international coal industry.

The consequences of emissions trading (ET)

The introduction of the European Emissions Trading System has now been set for 2005. According to EU-internal estimates, including that of the Commission, coal-based electricity generation in Europe will bear the main burden imposed by the ET regime. A ‘fuel switch’ to gas and possibly to nuclear power too – and to a much lesser degree to renewables – seems to be the likely consequence. But the extent to which this is desirable from an energy-policy viewpoint is quite a different matter.

Link to Figure 20: Climate protection in the European Union
http://www.steinkohleportal.de/medien/other/20040727092430.pdf

Under the Kyoto agreement the EU has committed itself to reducing greenhouse-gas emissions by 8% overall. As part of the ‘burden sharing arrangements’ each EU member state assumes individual responsibility for part of the overall reduction quota. Germany is to reduce its greenhouse-gas emissions by 21%, which represents about 75% of the total EU commitment. Some other countries, by contrast, are even allowed to generate more greenhouse gases than before.

The most important instrument for implementing the Kyoto Protocol within the EU is the ‘emission rights trading system’. This is one of the so-called ‘flexible instruments’ of the Kyoto Protocol and is designed to enable emission reductions to be realised at the point where they are most cost effective. According to the EU Directive on emissions trading, which took effect in August 2003, the European emission-rights scheme is to be split into two trading periods: the first begins on 1 January 2005 (and the new accessions countries are included in this) and runs until the end of 2007. The second trading period will run from 2008 to 2010, which is the Kyoto commitment period proper.

The EU Emissions Trading Directive is to apply irrespective of whether the Kyoto Protocol enters into force or not and will relate initially only to the greenhouse-gas CO₂ - other gases may be included after 2008 – and selected emission-intensive activities. This comprises practically all the major coal consumption industries (combustion plant in excess of 20 MWth (power stations), coke works, steel manufacturers, cement producers, chemicals manufacturers, etc.), while transport and private households have for the moment been excluded from the provisions of the emissions trading scheme. Installations and operations coming under the Emissions Trading Directive will be subject to a ‘cap and trade system’, which means that each plant is allocated a specific emissions budget – or ‘cap’. Those emission rights that are not required can be sold on the market and additional rights can also be purchased (‘trade’).

The EU Emissions Trading Directive is to be transposed into national legislation by the various member states. At the heart of the system is the National Allocation Plan (NAP), which has to be submitted to the European Commission by 31 March 2004. The NAP regulates the distribution of emissions from the different business sectors in accordance with the greenhouse-gas reduction targets (macro-allocation) and manages the rules and criteria under which the emission trading rights are allocated to the various installations and activities specified in the Emissions Trading Directive (micro-allocation). In Germany the NAP applies to some 2,400 individual installations.

In January 2004 the Federal Environment Ministry (BMU) submitted a draft proposal for an NAP that had not been coordinated or agreed with the Ministry of Economics and Labour (BMWA) or with the industries affected. This draft provided for an extremely stringent emissions budget that would have required industrial operators to reduce their CO₂ emissions by nearly 8% in the first trading period of 2005 to 2007. German industry, on the other hand, had been anticipating a need-based provision of emission trading rights during this period, especially since under the terms of the voluntary agreement on emissions reduction their consent was needed for the reduction period leading up to 2012. Furthermore, the regulations being proposed for the construction of new and replacement power stations would have challenged Germany’s existing energy mix, as they would have directed investment primarily towards the early replacement of coal and lignite-fired installations by gas-fuelled plant.

Link to Figure 21: The German National Allocation Plan
http://www.steinkohleportal.de/medien/other/20040727092933.pdf

The NAP compromise agreed between the BMU and the BMWA on 30 March 2004 provides for a substantially larger emission budget for the ET sectors, namely 503 million t of CO₂.for 2007 (the BMU draft had proposed 488) and 495 million t of CO₂ for 2012 (BMU draft 480 million t).

Most of the structural regulations contained in the original NAP were also removed. For example, instead of being based on a ‘gas benchmark’, the emissions-treatment plant for new power stations would henceforth be designed according to ‘fuel-specific latest practice’. Process-related emissions – especially from the steel, cement and glass making industries – were to be excluded from the provisions for emission reduction, while installations that had already been the subject of emission reduction measures during the period 1.1.1996 to 31.12.2002 (‘early action’) would not have to take any further measures provided that they met certain criteria. The emission budget available until 2005, which would offset the phasing-out of nuclear power, was calculated at 3 million t CO₂. Given the overall availability of emission trading rights and the aforementioned ‘special regulations’ this meant that for the period 2005 to 2007 each individual industrial plant would be required to cut its environmental emissions by 2.35%.

The compromise also contained a penalty clause for coal and lignite plant more than thirty years old. These power stations would have to cut emission levels by 15% during the period 2008 to 2012 if their net efficiency was below 31% in the case of lignite and 26% for coal.

However, in the case of coal fired plant there is the assurance that up to 2012 at least – which coincides with the Kyoto period – there will be no stringent burdens imposed by way of the emissions trading system. However, for the time being nothing definite has been laid down in respect of the general regulatory framework and specific ET targets for the post-2012 period.

Amendment of the Renewable Energies Act.

Finally, let me say a few words about the impact of the Renewable Energies Act (EEG).

Although everyone involved must have known in advance about the level of the compulsory payments that would be laid down in the EEG for electricity generated from renewable sources, Federal Economics Minister Clement and IGBCE Chairman Hubertus Schmoldt caused a storm of indignation when they referred to some of the relationships involved. A disingenuous debate then commenced between various parties as to whether these payments should, legally speaking, be seen as state subsidies or not.

According to commitments given by the Federal Government the public budget was to allocate a financial framework of € 15.87 bn for the coal industry to cover state aid, the cost of colliery closures and inherited liabilities for the period 2006 to 2012. Each year the level of aid would be scaled back from € 2.7 bn in 2005 to € 1.83 in 2012.

By comparison, according to EWI figures, the EEG payments made between 2004 and 2010 – that is to say over a seven-year period – will build up to a total of € 28 bn, of which € 19 bn can be regarded as a subsidy equivalent. And this makes no allowance whatsoever for the expenditure on ‘balancing power’ needed to offset the low availability of renewable energy and on network extension work, which is required because the electricity will not be consumed where it is being generated. When pro-rated on the basis of electricity actually generated the aid given to the German coal industry works out at just below 3 cents/kWh, while for wind energy the initial grant amounts to 9 cents/kWh.

No answer is forthcoming to the question of who receives the money that is to be rerouted from the state and who makes a profit from it. Certainly no-one would begrudge this income to turnip farmers who have windmills operating on their land. But a number of serious players in the free market economy also have a financial interest in seeing that the excess subsidies paid out to some sectors is continued.

Link to Figure 22: Employment impact of the total investment in renewable energies for 2002
http://www.steinkohleportal.de/medien/other/20040727094914.pdf

And what about the new employment opportunities that will be created? The figure of 130,000 new jobs in the renewables sector, which is being bandied about by the green lobby, is exaggerated. Scientific studies undertaken by a number of independent institutes, including the Bremer Energy Institute and the RWI, show that the employment impact of the renewable-energies industry will be negative in the long term. Of course a fair number of jobs will be made available during the investment and commissioning phases. But this is not sustainable and will be more than offset by the budget impact resulting from the lower purchasing power due to the compulsory payments scheme.

Summary

The green lobby has not been squeamish in its dealings with the energy supply industry and the other sectors affected. The arguments are deliberately one-sided, always overblown and endlessly repeated. Environmental catastrophe is predicted as if it will definitely take place tomorrow or the day after unless more money is invested in ‘green actions’ and the coal and chemicals industries are shut-down immediately. For the various industries and organisations affected, like ourselves, this is not something new. But now and again we are also disappointed when industry representatives get a sniff of the ‘ecology business’ and so prevent a unified position from being adopted in the face of overblown green ideas. Nevertheless, we must not give up the hope that in spite of all the fuss and excitement a sense of proportion and reason will eventually return.

There is in fact a real demand for new power stations and the feasible alternative to this does not lie in a ‘coal or renewables’ strategy but in the question of what the various market shares should be within the energy mix of coal, gas, nuclear power and renewables.

Not for nothing have we been seeing press reports speaking of a revival of nuclear power as a solution to the CO₂ problem. But it should not be forgotten that it was the nuclear-plant construction and research faction that initiated the great CO₂ debate back in the 1980s as a diversion from the Chernobyl controversy.

In reality the world will pay little attention to the decisions that we take either in Germany or in Europe. The question is whether we want to involve ourselves in developing new coal fired power stations. The Federal Government, the regional Government of North Rhine-Westphalia and the European Commission have recognised this and are keen not to leave the field open to the USA.

All this points to the ‘green’ side in one corner and the responsibilities of the Government in the other. Realistically speaking we can expect to see Germany having a mix of retrofit plant and one or two new coal-fired power stations by the end of the decade. Even in this changing energy-mix scenario, which will see the phasing-out of nuclear power, a twofold increase in renewables use and a larger quota of imported coal, indigenous coal will still have a role to play and a contribution to make to energy security. And this will apply even more so to that other and extremely price-competitive fuel - lignite.