Germany opens first coal-fired power plant in eight years

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Michael Bastasch DCNF Managing Editor
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Germany has just opened its first coal-fired power plant in eight years, reports Bloomberg, as the country grapples with renewable energy subsidies that are driving up electricity costs.

The German energy company Steag says its 725-megawatt coal plant in the western part of the country will begin commercial operations later this year, after “optimization works and testing” have been completed. This will be the first hard-coal-fired plant to come online in the country since 2005.

This is just the beginning of coal’s German comeback, as ten new hard-coal plants are scheduled to come online in the next two years, according to Germany’s electrical grid regulator. This will boost the country’s coal capacity by 33 percent, according to analysts.

Coal’s comeback has been made possible by the massive drop in carbon prices in the European Union’s cap-and-trade system throughout the year. This has made burning natural gas less lucrative for power companies.

“Coal prices recently fell to their lowest price for over four years in October and carbon prices are half what they were two years ago, making coal-burn extremely attractive to generators in terms of profitability,” Gary Hornby, an energy analyst at Inenco Group Ltd., told Bloomberg.

Data shows that the burning coal earns companies 9.16 euros per megawatt hour, while burning natural gas nets companies a loss of 19.31 megawatts per hour. As more natural gas plants are taken offline, they have to be replaced by coal.

“Gas power plants coming off line must be replaced with baseload generation, coal seems the logical solution,” Hornby added.

Germany has also been struggling with skyrocketing energy costs due to government support of renewable energy. the country now has some of the highest energy bills in Europe and the government is grappling with how to cut back their green agenda without imperiling their global warming goals.

Chancellor Angela Merkel has vowed to reform the country’s faltering renewable energy laws, but is also pushing nuclear power out of the equation — planning to shut down nine nuclear reactors within the decade.

However, that power can’t be made up with renewable energy from wind or solar as such sources are too intermittent to provide reliable, round-the-clock power, according to analysts. Merkel’s energy plan will need more coal power to make up for when the wind doesn’t blow or the sun doesn’t shine.

“Merkel’s government has put itself in a dilemma,” said Danny Graefe, a power and natural gas trader. “On the one hand it is promoting green energy, on the other hand, we see all those hard coal plants coming online now. I don’t see anything bullish in the power market.”

Germany is expected to stay reliant on coal for the foreseeable future, as 45 percent of the country’s power needs were met by burning coal in 2012.

“We won’t be able to renounce coal from Germany in the foreseeable future,” said Hildegard Mueller of the energy lobbying group BDEW. “Coal is essential to the energy mix.”

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