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New German climate goal may see coal exit by 2030 – experts


07 May 2021 14:31





07 May 2021 14:31

(Montel) Germany’s more ambitious climate targets could see the country exit coal as early as 2030, though lagging renewables expansion may pose a security of supply risk, analysts told Montel on Friday.

The revised goals – with the government confirming this week it was aiming to cut emissions by 65% by 2030, from 55% initially – would “definitely” mean the death of coal-fired generation by decade end due to stronger carbon prices, said Yan Qin, analyst at Refinitiv.

The government-mandated 2038 deadline for the closure of all coal plants “no longer seems consistent” with Germany’s updated emissions target, agreed Roy Manuell, analyst at Icis, with the government also bringing the net zero target forward five years to 2045.

Coal’s faster phase-out would be market-driven as “the economic case for it will disappear”, said Christoph Maurer, director of consultancy Consentec.

Bullish CO2 prices had already begun to pressure the clean dark spread, a measure of coal plant profitability. At a 42% efficiency level, the front-year spread was last at EUR -0.43/MWh, according to Montel calculations.

Soaring CO2
The Dec 21 EUA contract had traded at record highs above EUR 50/t this week and was last seen up EUR 0.22 at EUR 50.16/t.

Espen Andreassen, analyst at Volue, said the country would face “severe security of supply problems” with an early coal exit, adding additional gas plants would be needed to manage the loss of capacity.

Yet, this would make achieving the emissions cut target “very challenging”, as gas plants were still large emitters.

Carbon prices, meanwhile, were “likely to stay at elevated levels due to the EU raising its 2030 climate ambition and tightening the market”, said Qin, with the EU planning to cut emissions by 55% from 1990 levels by the turn of the decade, from 40% originally.

German power prices would therefore likely rise amid stronger carbon prices and lack of baseload capacity.

“Assuming a coal phase-out by 2030, this is likely to mean an increase of EUR 5 [in average power prices] compared to a 2038 scenario,” said Julius Ecke, analyst at energy consultancy Enervis.

Green expansion
Current renewables expansion plans likewise seemed lacking in comparison to the stricter climate goals, with extra investment required and new targets, experts said.

With a greater reduction target, Germany should increase the share of renewables in power consumption to 70% by 2030, up from the existing 65% planned, an earlier study from Agora Energiewende showed.

Although sources said permitting issues remained a challenge to building more wind and solar capacity, undersubscribed tenders have also led to the rate of new onshore wind farms slowing down in recent years.

Technologies such as green hydrogen, carbon capture and storage and energy storage were at present too costly and the EU ETS would not bring down their costs alone, said Qin.

“Therefore, support from government is essential to speed up the development of these.”

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