German coal 1, Climate 0

In this week’s pod, energy expert Claudia Kemfert says Germany’s coal exit plans are a massive disappointment. 

Listen to a discussion on how the proposals will not end coal generation quickly enough and will come at a far too high cost, both for taxpayers and the climate. 

Host: 

• Richard Sverrisson, Editor-in-Chief Europe, Montel. 

Guests: 

• Claudia Kemfert, Head of Department Energy, Transportation, Environment, DIW Berlin, 
• Nora Kamprath Buli, Editor Germany, Montel. 

Transcript

Richard Sverrisson, Editor-in-Chief Europe, Montel: 0:05

Hello listeners and welcome to the Montel Weekly podcast, bring You Energy Matters in an informal setting. My name is Richard Sverrisson. Today we're in Berlin and we're looking at a German energy policy special. I'm joined by my colleague Nora Kamprath Buli. Who's editor Germany. Welcome to Nora. Hello. How's 2020 been so far for you?

Nora Kamprath Buli, Editor Germany, Montel: 0:25

It's been a busy start of the year.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 0:27

We've both had birthdays, haven't we?

Nora Kamprath Buli, Editor Germany, Montel: 0:28

We have Capricorns all the way. Exactly.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 0:31

I hope you got some nice pres. Yeah,

Nora Kamprath Buli, Editor Germany, Montel: 0:33

I did. Nice. Some grumble. Yeah, a nice cushion from a friend. Now that I'm, you know, getting old, I need to be comfortable.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 0:38

Absolutely. Very nice. Yeah. Perfect. And we are gonna meet. A very prominent economist economist, even who is often in the news regarding energy policy from Berlin. Could you give us some more details about who we're gonna meet today?

Nora Kamprath Buli, Editor Germany, Montel: 0:54

Yes. We're going to to meet up with Claudia Kemfert. She's the professor of Energy economics and sustainability, and also head of the Department of Energy, transport and Environment at the German Institute of Economic Research. DIW, as you said, quite a. Prominent voice in the energy policy debate in Germany with, you know, strong opinions. So I'm looking forward to hearing her thoughts.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 1:17

Should be a good discussion, I think. And yes, last week certain policy was made clear or a little bit clearer, wasn't it? In Germany we had indeed. The timetable for lignite closures. Could you say something about that, Nora?

Nora Kamprath Buli, Editor Germany, Montel: 1:28

Absolutely. That was a timetable we've all been waiting for quite a long time. So what we've finally got is that 2.8 gigawatt of Lignite will leave the market over the next three years. All of those belong to RWE. And are situated in western parts of Germany. Then we will see two years between 23 and 24 where nothing leaves the market. And then another sort of bout of closures between 25 and 29 or 5.7 gigawatt combined. This time also covering AK who runs the Ignite operations in eastern parts of Germany. There was a big debate how far East German companies or the East German mining region can already handle. Losing. Valuable workplaces that are very important for the economy there.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:10

And then we've seen the ultra modern coal fire plant finally, potentially

Nora Kamprath Buli, Editor Germany, Montel: 2:15

also they say Yes,

Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:16

finally coming online around.

Nora Kamprath Buli, Editor Germany, Montel: 2:19

So middle, middle of the year,

Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:20

mid middle of the year. And then some hard coal plants, which be tended for closure. But I think I'm looking forward to discussing with Claudia more what this means for the market and more about the criticism surrounding these policy ANA announcements. And even hearing more, what it means for EUA cancellations. And then other energy policy issues. Indeed. So, we'll, we'll leave that for the discussion with Claudia.

Nora Kamprath Buli, Editor Germany, Montel: 2:44

Yeah. Looking forward to it.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:45

Excellent.

Nora Kamprath Buli, Editor Germany, Montel: 2:46

Let's go.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:46

Let's go. Hello and welcome, Claudia Mfe.

Claudia Kemfert, Head of Department Energy, Transportation, Environment, DIW Berlin: 2:53

Hello.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:54

Welcome to the Monte Weekly podcast. It's an honor to have you on board.

Claudia Kemfert, Head of Department Energy, Transportation, Environment, DIW Berlin: 2:57

Thank you for having me.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:58

I thought we'd start by discussing latest policy moves with regard to announcements made by the German government recently. There was some clarity last week about the lignite closure timetable. Could you give us some details in here and what your reaction was to this?

Claudia Kemfert, Head of Department Energy, Transportation, Environment, DIW Berlin: 3:16

Yeah. Well, it has been a long process to come to this, uh, cold phase out plan, the concrete phase out plan, including the law in Germany. Because previously there has been a coal commission also establishing recommendations how to do it best in Germany, and the government discussed one year and came up with a solution last week meaning that they will not follow in total the recommendations of the cocom. They are not phasing out coal as quickly as the commission has indicated or recommended. They are have also agreed on special compensation payments for the utilities, which are very high. So at the end, I would say it's not wise to not to follow the recommendations of the co committee or cocom, and also to increase the cost so heavily, so it's quite expensive. Coal phase out or quite expensive climate policy for not enough transformation. I would say,

Richard Sverrisson, Editor-in-Chief Europe, Montel: 4:18

how does it differ from the plans laid out by the coal commission, what the government put forward last week?

Claudia Kemfert, Head of Department Energy, Transportation, Environment, DIW Berlin: 4:23

Yeah. They are starting later than the Coal Commission has recommended. They are not phasing out as. The capacities as the coal Commission has indicated, and they are not increasing the renewable energy as much as the commission has indicated. And also the payment or the compensation are much higher than initially. Thought

Richard Sverrisson, Editor-in-Chief Europe, Montel: 4:46

these compensation payments, how big were these?

Claudia Kemfert, Head of Department Energy, Transportation, Environment, DIW Berlin: 4:49

Well, it's about three billion euro that the coal companies get. It's much higher than initially planned, especially if you look at the profitability of the power plants. It's much too high. I would say. They get a lot of money. For phasing out nothing, so to say, because the coal fire power plants are already quite old and they would've been shut down anyhow, so that's quite large. And also the compensation is quite high,

Richard Sverrisson, Editor-in-Chief Europe, Montel: 5:15

so it's quite a big gift to these companies anyway. I mean, would there be a case for saying that some of these plants. Now would run longer than they would originally have done, given what's happening in the carbon market, given how these are so increasingly being priced out of the market.

Claudia Kemfert, Head of Department Energy, Transportation, Environment, DIW Berlin: 5:32

Yeah, that's a good point. Especially because of the increasing CO2 prices, they are already, uh, priced out. So I would say yes, they're running longer. And they get money for it. And that's not how market should solve it, but it's a good deal for the utilities, really good deal they make. Profit out of it. But anyhow, the government wanted to phase out nuclear coal after nuclear. And this is the reason why they came late and they wanted to have a also a peaceful way of doing it with all the different. Kind of, uh, voices. They wanted to get around the table and get a solution for it. But at the end, I would say it's quite, it's quite, um, expensive, uh, for util or for the, the taxpayer in Germany. But it's interesting you're saying they try to find a. Solution that would kind of please everyone. But the immediate reaction, at least from the environmental, uh, lobby was, was, was outrage. I mean, what was it? It's a scandal. It was very strong words they found because they felt that so much of it was in breach of the, uh, the heart fought proposals from the coal commission. And I think one of their key points was that, as you said, the closures come later. Uh, there's three stages I think, of closures and, and a lot of the plants going offline are kind of coming offline at the last possible. Time or year. Some have argued that that really is also detrimental to really reducing emissions. Do you have some numbers on that or how much harder is it for Germany?'cause they're doing it to meet emissions target. They're not just doing it to ruin the coal industry in Germany there, there is a a plan. Yeah, exactly. And this is why it's so pity that they are not following the very difficult agreement of the coal commission because I recommended to start earlier with. The phase out coal fired fire power plants, the older one and the most inefficient ones, and then not do everything at the latest. And right now they are doing the opposite. They do everything at the latest, so they're running longer and get even more money for it as they initially have recommended. So I think it's not a wise strategy to do it in that way, especially if you have a coal commission recommending special. Path and also compensation methods not to do that. In that way is exactly as you described. They are opposing a part of this committee or commission. And that's a problem also for the peaceful way of doing it. And also from the. What you mentioned, the emission reduction, it'll not be high enough, or they do it because they want to reduce emissions in the energy sector. That will not happen in that way. So to the first calculations, it's 50 million above the target they wanted to reach. So 50 million tons of CO2 need to be reduced in another sector. Most likely it's the transportation sector, not the building sector, because you need more time for it. And here's a big question mark, how they would do that because the transportation sector is lacking emission reduction strongly, and they need to revise that as well. So to my opinion, it's very it's really pity. I agree with this criticism. You have heard or mentioned in Germany indicating by the environmental groups, but also by scientists of that group and saying, well, it's. Too late, it's too expensive and we will not reach the time, the climate targets. And that's, um, that was the initial plan of doing so. Yeah. So it's, it's not understandable why they do it in that way.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 8:56

So it's obviously a, a victory for. Some hard lobbying by the utilities or by the, the coal lobby, it seems, seems to be. But an additional aspect, which I find very interesting, Claudia, is that you have, there's been talk as long as, almost as long as I've been working at Montel about this one coal plant called, uh, this very ultra modern coal plant that looks like that's gonna come online finally, after many, many years, 10, 12, 15 years. So isn't that a little bit ironic? That actually Germany then is, is granting, um, you know, a license for a new coal fired power station to come online and emit even more.

Claudia Kemfert, Head of Department Energy, Transportation, Environment, DIW Berlin: 9:30

Yeah. That's really a big mistake to my opinion, because as you were correctly mentioning, they're emitting more, even though they say, well, we are. Shutting down old fired power plants and we are not emitting more. But if you look carefully at the, at the balance, you see it will, they will increase emissions, especially because this power plant will run until the end. And this is not a wise decision to bring a new coal fire power plant in place. Especially of the signal you give also that you announcing a cold phase out plan and the first thing you do is to phase in a new one. That's not a, that's not a clever strategy, I would say. And the Coal Commission recommended not to do that. Yeah. And I would agree they should have not done it and they arguing because the compensation is too high. But right now the compensation is already extremely high. So it seems that they are just as you mentioned, a big victory of the coal lobby beer. That's for sure. Because if they would have not agreed on these huge compensations would've been much cheaper and also more efficient.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 10:32

Absolutely. And then you have the additional factor of once you do start closing these plants, if and when, well, we have the timetable now, of course, but then what you do with the eua.'cause this is a big factor for the carbon market. The carbon market is looking at this and saying, well, we want clarity on when and how. How do you do this? Because, you know, if this is not clear, then you know you're gonna leave a lot of uncertainty. Will will these come to the market or won't they come to the market? Right. And by when? Exactly. What's your view here?

Claudia Kemfert, Head of Department Energy, Transportation, Environment, DIW Berlin: 11:05

Well, I completely agree that you need clarity for this. And at the first stage they said, well, we will not get these emission allowances out of the market. But now they say, okay, that we will do that and we will use the market's ability reserve for this. But it's unclear how big this will be and what does it mean on the market and how much they will really reduce the or. Put the emission certificates into this reserve in order to clarify the market. So we need urgency on the clarity Of this.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 11:36

You know, we are a few days before the government is due to officially announce this. Do you expect any changes? To be announced or any unexpected issues to come up when it is due, which is on Wednesday 29th. You know, if I'm not mistaken, will there be any more clarity on this issue, for example, or will they backtrack even in as a response to the criticism?

Claudia Kemfert, Head of Department Energy, Transportation, Environment, DIW Berlin: 11:58

Yeah, I hope so. That they will give clarity, at least on this emission certificates. That they clearly say while we do that. We are calculating the emissions and we will put this EUAs out of the market and that same amount or in the same value. I hope that they will say this in this direction, but I don't assume that they really, that they will come up really with surprises on new ideas. I could imagine that there, the opposition, especially the greens, will react in the parliamentary process. After Wednesday when they announced it, because the last time when they established the CO2 prices, if you remember, in Germany and the CO2 increased of the price of for for different kind of fossil fuels they made the the law and after the greens and the parliamentary process changed the price again, and they already announced that they would go for different kind of corrections. Well we will see whether. They will make it.

Nora Kamprath Buli, Editor Germany, Montel: 12:55

Yeah, that's an interesting point because last time it was the, the exactly which represents the federal states, I guess, in, in, in Germany, and, and they can propose changes, but obviously one of the key issues with the Ignite deal has been that. Some of these states are very instrumental in bringing about the kind of watered down version. So how much of a chance do you see that sort of body can bring changes?

Claudia Kemfert, Head of Department Energy, Transportation, Environment, DIW Berlin: 13:19

Well, it might bring a little changes, but not fundamental one, so. But I think it's quite unlikely that they will go for larger changes because the, if they would do so, they, we would have already heard it. Yeah. That they say it to oppose it. But they didn't, they were very clear the last time with the C two prize as the government was also presenting their ideas. The greens immediately said, well, we are. We oppose that and we'll, we'll try everything we can to, to change. But this time that didn't say so. I think the chances are quite low that they will come up with any kind of corrections.

Nora Kamprath Buli, Editor Germany, Montel: 13:55

Maybe as a note to our listeners, the the national CO2 price was raised from 10 euros to 25 Exactly. As part of that process, because 10 years would've, it was argued to have, have no effect. Yeah.

Claudia Kemfert, Head of Department Energy, Transportation, Environment, DIW Berlin: 14:05

That was a so-called climate package. Yeah. Where the German government. Try to establish a climate package and there was a lot of criticism from all, for all different kind of sites.

Nora Kamprath Buli, Editor Germany, Montel: 14:14

Of course, we've talked a lot about Ignite. Dalin was a hard coal plant and basically with the Ignite closures, you're getting compensation direct to the operators because there's only basically two big companies, whereas hard coal, they're going the tender route. Do you think that makes sense? We haven't seen a price, a sort of maximum price. They're willing to pay. An operator for agreeing to shut down capacity. That's kind of like a, what do you call, a reverse auction, I guess. Mm-hmm. The lowest price wins.

Claudia Kemfert, Head of Department Energy, Transportation, Environment, DIW Berlin: 14:41

Exactly. This is what I've heard as well, but there is a lot of criticism against this this plan to have this tender process because the shut the. How do you call them? Municipal utilities? Municipalities. They are offending it and they are opposing it because they think it's unfair to them, especially if you have a hard coal CHB plant. It's, or they say it's, it's more, uh, costly in, in changing. Then this method would allow. To price in. And that's a major disadvantage. They see, although the, the league night utilities get full compensation and could run longer. And the hard call, including CHP has different rules here. And I think the last word here is not spoken, but we will see how they. Manage really to change because what we need here is also phase in of renewables, especially also for heat renewable heat or CHB plans, and this has not been established. So right now, to my opinion, it's only a clear focus. Are phasing out, phasing out everything, phasing out, nuclear, phasing out coal, phasing out leak night, phasing out steam. Uh, but nobody talks about phasing in. And this is a big pity. And this is, this is really a mistake because talking about CHB, we need clear rules in transferring this to renewable heat. And it's not done at all.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 16:09

And as you say, the deal as it is on the table now, or the measures as they've been put forward will indicate an increase of 50 to 60 million tons and the, those reductions or potential reductions would need to come from the transport sector, but then you'd need what electrification transport. Which would then imply a huge, you know, rollouts of, of, of new renewables. Where's that gonna come from? Exactly Who's gonna build that and who's, where's the incentive for that coming from?

Claudia Kemfert, Head of Department Energy, Transportation, Environment, DIW Berlin: 16:36

Well, there are no incentives for this. Well, transportation, sustainment, transportation is more than just electrifying the cars. It's much more than also the railway, which, which needs to be strengthened. Of course also with, uh, electricity from renewables. We need less transportation, intelligent informa and transportation, especially also in the cities with digitalization and smart mobility concepts and all this. There are not enough incentives for this because we see the emission increase of the past is coming primarily. From road transportation, road transport, and here we need to shift away from diesel and gasoline cars towards more electric mobility, of course, but also a less or more efficient transport mode at all and mobility. Per se, including digitalization needs clear incentive for change. To answer your question, there is no clear strategy to compensate this 50 or 60 million ton of CO2. So at the end, we might not reach the climate targets as we have indicated to do so, that's. So with this, with this plan, we will not reach it.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 17:44

So if you were in charge of this policy, then Claudia, what, what would you have put forward? What would've been the key elements for you?

Claudia Kemfert, Head of Department Energy, Transportation, Environment, DIW Berlin: 17:51

I would follow the recommendations of the coal commission. This is why they have been. Recommend or establish the recommendations with a really hard process in getting those. And then the core phase out would be earlier, would be more efficient and less costly. And in the, at the same time, what we need to do is to increase the share of renewables by three or four times. More than we do right now. And this needs to be attracted and especially in order to compensate not only the electricity for the energy sector, but also for industry, for the electrification of the transportation sector. We need more renewables. And right now we have a problem with the wind. Yeah. Wind share increase. So there's a huge mess, although the people like it. The government is doing everything. The people. Seem not to like it anymore. And the whole process is very inefficient. So that would be my second thing to, what I would do better as you ask, is to change that and also to change your process. And the third thing I would do is transportation, which needs to be more sustainable very urgently. And all the three things are lacking.

Nora Kamprath Buli, Editor Germany, Montel: 19:04

What can the government do to increase the renewable share Mean three to four times, I think you said obviously Germany already has. I think over a hundred gigawatt of renewable capacity.

Claudia Kemfert, Head of Department Energy, Transportation, Environment, DIW Berlin: 19:12

Yeah. The three to four times of the speed of right now. Now Oh, of the speed. Okay. Yes. The speed of of increasing the share. It's not the total capacity. Okay. But what we need right now is especially an increase of renewables in the Southern Germany, in Berg and Bavaria. Especially because they are also the energy demand is quite high. And we need also a higher share of renewables as already set for the industry and for CHP for the heat production as well, and including a higher share of insulation of buildings because we need a higher energy efficiency in the building sector as well. So for all this, we need an increase of renewables. Not only wind, solar is is still limited with, 52 cap of 52 gig of compensation gigawatt cap that should be replaced or should be deleted completely. And also the increase of wind is very important biomass and all the rest geothermal as well. So we need to have all the different kind of renewables as team players in the market as soon as possible.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 20:17

What's the role of hydrogen here, Claudia? I mean, where, where do you see that fitting in? Is it, it's maybe too early to say, but that could have a key role in, for example, the, uh, you know, the, the decarbonization of transport? Yeah. Heating maybe as well.

Claudia Kemfert, Head of Department Energy, Transportation, Environment, DIW Berlin: 20:31

No, for heating, I especially don't see it because it's too costly because we need to produce hydrogen and for this, we need seven to eight times more renewables than if we would use the renewables. Your renewable electricity directly. So we recom, I recommend to use renewables electricity directly as much as you can for electric mobility, for railway, for buildings like heat pumps, for example, and for those areas where you don't use the electricity directly, especially for ships. Planes and trucks. We recommend to use alternative fuels, and here hydrogen could be one option,

Richard Sverrisson, Editor-in-Chief Europe, Montel: 21:11

but probably further down the line.

Claudia Kemfert, Head of Department Energy, Transportation, Environment, DIW Berlin: 21:13

Further down the line. Especially because you have to produce hydrogen and it's very costly. Very. You need a lot of renewables for this, and there are scenarios showing where we go to. North Africa and produced with solar heat, hydrogen there, but that's also very costly because you need transportation. It's so costly that you should use it only for those areas where you don't have a clear alternative with renewable energy to use it directly because of efficiency and because of cost.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 21:41

And then I think key element as well on, on the policy front is what's come gonna come outta Brussels in this new commission in the green deal. Do you expect more to come from the commission in terms of, you know, clearly laying out a, the decarbonization of the gas sector and also becoming. You know, the electrification of transport, et cetera, do you expect a big push to come from them?

Claudia Kemfert, Head of Department Energy, Transportation, Environment, DIW Berlin: 22:05

Yeah, I, I expect a big push coming from the green deal, especially because of the investment which is triggered also to the individual sectors where we need it, with the increase of renewable energy, with the increase of electrification of the transportation sector. Also in the building sector and use such kind of proma approaches that you use. The buildings which are very energy efficient, that they produce electricity and consume it with battery storage for example, or other storage options. And all this is in the green deal. And for, to me, it will bring a big push. Although the 1 trillion, which is mentioned, sounds a lot. It's not really a lot. Of money. If you look at the expenditures that Europe is doing every year, it's only the subsidies of fossil fuels or the imports of fossil fuels, which is 1 trillion in a in two years. So, uh, that's not a large amount of money, but we need for this more. But the framework is important here and Europe. Europe will provide this framework which we need in order to transform the whole system. And for this, I would say the green deal is much better, much more worth than the climate package or what Germany's right now doing.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 23:14

Okay. We'll watch, keep a close watch on, on, on Brussels I think going forward. Claudia Comforts, thank you very much for joining them on podcast and Nora, thank you as well for joining us.

Nora Kamprath Buli, Editor Germany, Montel: 23:23

Thank you. Thank you.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 23:27

Remember, listeners to keep up to date with all our stories on Montel News and follow us on Twitter, LinkedIn, and subscribe on Apple Podcasts and Spotify, and even Google Podcasts. Thank you and goodbye.