Germany’s strategy to phase out its use of coal-fired power stations by 2038
The German Chancellor Angela Merkel has announced the government’s plans to phase out its use of coal-fired power stations by 2038. The country is a primary user of coal to generate electricity and is reliant on the fossil fuel for 40% of its power (compared to only 5% reliance in the United Kingdom). A key reason for the measure is Germany’s ambition to reach its Climate Change Targets under the Paris Agreement; coal is responsible for 20% of the country’s greenhouse gas emissions. According to Joachim Schellenhuber, an advisor to the chancellor, the decision is an example of the move towards a “post fossil age”. Germany is also seeking to shut down its last nuclear power stations in 2022.
This shift away from traditional sources of power is a point of contention for both energy companies and their employees. The energy companies are to be compensated for the premature closure of their plants, and a figure of 40 billion euros overall has been agreed upon. The redundancy of 20,000 workers in this heavily unionised industry is perhaps a larger concern for the government. Nonetheless, it is likely that these workers will be able to be absorbed into other energy sectors, notably the renewable energy sector which already employs around 340,000 people in Germany.
In its final report, Germany’s coal exit commission proposes that a scheme be implemented for the provision of monetary recompense for operators of lignite plants and its employees through “mutual agreements”. Though many factors will impact the amount of compensation received, the commission made clear that any payments would be made out of state budget and not by a surcharge on the power price.
The government aims to increase the supply of renewables from 32% (the current figure) to 65% by 2030 in order to mitigate any negative impacts on the consumer and reliant industry areas. It has also been suggested that the move away from coal will lead to a greater demand for natural gas in the country. However, this is disputed as it is possible that the production cost of renewable energy will fall considerably in the next decade, making this the most cost-effective way for Germany to generate additional electricity.
Ultimately, Germany’s decision is indicative of a broader trend towards renewables and away from traditional sources of power. This presents significant challenges for businesses in the energy industry as they adapt to changes in demand across the globe.
