POWER March 2016 - 29

GENERATION TRANSITIONS
5. Lignite leader. Germany is the world's largest lignite coal supplier. The Garzweiler strip
mine shown here supplies fuel for nearby power plants. This mine has been controversial in
recent years as it involved the owner, RWE, relocating an entire town of 900, and the Immerath
cemetery, to make room for mine expansion. Courtesy: RWE
phased out by 2018, Germany's 53 coal-fired
power plants will continue to burn coal and
generate electricity for years to come. Germany's
lignite resources are " highly competitive,
aside from the externalities, without any
government subsidies at all. So the challenge
is fundamentally different for lignite than
hard coal, " said Craig Morris, lead author of
the influential Energy Transition blog and the
author of two books on the Energiewende, in
an interview with POWER.
In fact, hard coal is increasingly imported
levy was increased in 2014 to €6.35¢/kWh.
The Agora report forecasts that record low
wholesale electricity prices will continue into
2018 at least. German " consumers will start
to see gains in terms of a gradual and permanent
decline in retail electricity prices over
the next five to ten years as the near-term
peak " government subsidies passes.
Coal Compromises
In any shifting economy, there are winners
and losers. In the Energiewende, the old coalfired
plants and the companies that own them
have been the biggest losers (though nuclear
operators might argue with that assessment).
The less these power plants run, the less
money they make. In 2015, the nation's lignite
plants generated 24% of German power,
second only to renewables with 30%, according
to energy market research group AG
Energiebilanzen. Hard coal accounted for
another 18.2%.
Changing Fates and Roles for Traditional
Generators. Establishment German
power companies like E.ON and RWE initially
dismissed the viability of renewables.
While lobbying against green expansion,
they instead invested in cutting-edge coalfired
power. Since then, the Energiewende
has been a nightmare for them.
Rapidly decreasing utilization rates for conventional
power plants are killing the financial
returns of old-line power producers, along
with those of the institutional investors who
once relied on their profits. In late December,
RWE even took the unprecedented step of
mothballing its brand new billion-euro Westfalen-D
coal-fired plant, deciding to close the
future white elephant before it was even able
to fire up (Figure 4). " The plant was damaged
in the start up phase. But since then, citing a
lack of financial perspective, RWE has decided
not to fix the error but to deconstruct the
brand new power plant. Though it cost over
1.4 billion euros to build, RWE will now sell
it as scrap for less than 50 million according
to reports, " said Christoph Podewils, Agora's
head of communications, in an interview with
POWER. In other words, RWE's creditors
March 2016 | POWER
and management don't believe that the return
on investment for this now-stranded coal asset
makes sense compared to investing more
funds into offshore wind capacity.
E.ON similarly applied in 2015 to shutter
two new, unprofitable gas-fired units. " The
price decline on the wholesale power market
has caused a crisis for conventional assets
and there's a significant excess supply, " said
Marc Oliver Bettzuege, managing director
of the Institute of Energy Economics at the
University of Cologne, who has studied the
even as domestic production is curtailed.
Furthermore, coal-fired power may be both
unpopular and losing market share domestically,
but exported energy from coal surged
last year. To put it more directly, Germany is
now increasingly importing coal mined from
abroad in order to burn it domestically so as
to generate excess electricity that is then exported.
One of the few ways coal plants can
still consistently make money is by exploiting
the export markets.
Accounting for the energy that was exported,
coal continues to provide roughly a
third of the nation's power and is the largest
Germany is now increasingly importing coal
mined from abroad in order to burn it domestically
so as to generate excess electricity that
is then exported. One of the few ways coal
plants can still consistently make money is by
exploiting the export markets.
markets for more than a decade. " The persistent
price pressure changes the profitability
calculations for the new construction or
completion of power plants. "
As previously noted, after nearly going
bankrupt after losing half their respective
market values, the newly restructured
E.ON and RWE are splitting their companies
into different entities. One part of the
new firms will ensure grid stability and run
the fossil fuel side. The other will manage
and generate renewable energy. Swedishowned
Vattenfall, which owns both several
mines and power plants in Germany, plans
to bundle and sell off its holdings this year
as well.
Implications for German Coal Mines.
Germany is the world's largest lignite coal
miner by volume (Figure 5). Though the government
has committed to stop subsidizing
hard coal production-now scheduled to be
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domestic fossil fuel source.
Precisely if and when all Germany's lignite
mines will be closed remains a very contentious
question. Coal mining is still one the
bedrock jobs in the former Communist East
Germany as well as in other formerly industrial
regions where unemployment remains
higher. Those communities and the powerful
labor unions there have formed alliances
with conservative members of the Bundestag
(German Parliament) to resist further cuts.
As a result, Germany's Federal Minister for
the Environment Barbara Hendricks' promises
regarding the end of coal have become
more restrained of late. " It's clear that we
have to have stopped using fossil fuels by the
middle of the century, at the latest, " said the
Social Democratic Party politician in midDecember.
Though this tallies with what was
just agreed to at the COP21 summit in Paris,
timelines as to when mines will be closed and
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POWER March 2016

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