BUND criticises lignite reserves: Not making the grade

The lignite reserve will be no more than an expensive placebo for climate protection if the Federal Government does not step up its measures. This is an extract from BUND’s call for the reserve to be doubled at least, and for costs to be minimised.

The German Federal Government decided in December 2014 that in addition to the measures already in place, the electricity sector needs to save a further 22 million tonnes of carbon dioxide (CO₂). This would enable emissions from the sector to be reduced to a total of 290 million tonnes of CO₂ over the next five years.

Once the government coalition has reached agreement with the coal lobby on a lignite reserve these decision will no longer apply. Under the agreement reached on 1 July 2015, lignite power stations with an output of 2.7 gigawatts will be put “on standby” as a capacity reserve until 2020, and then shut down completely. In return, the companies will receive compensation payments that are still to be negotiated.

The real purpose of the capacity reserve is to ensure security of supply; this “stockpile” is intended to avoid any bottlenecks in production. But considering the current 10 gigawatts of overcapacity, such a precautionary measure does not seem to be a high priority. The reserve has therefore been relabelled the “climate and capacity reserve”, and will include old lignite power plants that will also receive state compensation, a so-called “scrappage bonus” (Abwrackprämie). The result is that the state is buying very little climate protection from energy companies at a high price.

Whether this is permissible under European law on state aid to industry is in doubt, and the Federal Government will have to convince the EU Commission on this point. The outcome is that this agreement and other accounting tricks in the climate action programme will lead to Germany missing its climate target for 2020.

A reserve capacity of 2.7 gigawatts is far too small to actively contribute to the necessary cuts in carbon dioxide emissions. The reduction in carbon dioxide emissions would amount to 10 million tonnes, i.e. less than the government itself has estimated.

In its carbon dioxide forecasts the government has assumed that 0.7 gigawatts of power station output and the corresponding emissions will be cut from the grid by 2020 due to aging stock. According to government wishes these 0.7 gigawatts will be deducted from the accounts again, so that the net reserve only amounts to 2 gigawatts.

To compensate for the failure of coal-fired power plants, a further four million tonnes of carbon dioxide will be saved by promoting combined heat and power (CHP). In the best case this would allow carbon dioxide emissions from CHP plants to be reduced to 303 million tonnes. In total, the electricity sector would not contribute the 22 million tonnes of CO₂ reductions that have actually been agreed, but only about 14 million tonnes.
As an emergency measure, on 1 July 2015 the government agreed on further climate protection measures worth a claimed total of 5.5 million tonnes of CO₂. Once again there are question marks concerning this list, for which some of the measures have not even been specified. Basically there is also a lack of evidence for the assumptions made for renewables and efficiency savings by 2020, so the savings are likely to be lower than assumed. Traffic emissions are also rising rather than falling, as the government still assumes in its climate protection calculations.

The shortfall in reaching the climate goal is likely to be even greater, since the government estimates do not provide any safety margins. They are close to the bottom of the forecast climate protection deficit of five to eight per cent. This is despite the fact that the electricity sector, which accounts for around 40 per cent of all emissions, not only generates the highest carbon dioxide emissions but has also contributed less than average to emission reductions since 1990 (17.7% reduction compared to an overall reduction of 24.7% in 2012). Furthermore, electricity generation is the sector that would offer the largest and most cost-effective reduction potential.

In the case of generation from fossil sources, highly emitting lignite plants have not yet made any contribution to CO₂ reductions. On the contrary: Since the year 2000, climate-damaging emissions from lignite have risen by three per cent, while emissions from anthracite have fallen by 20 per cent, and from gas and oil by six per cent.

Coal-fired power generation from lignite, etc., is also responsible for the steadily rising electricity surplus. A new record of eight per cent was set for electricity exports in the first half of 2015. This overproduction undermines market prices (currently around 3 euro cents/kWh), out-prices power stations with lower emissions in Germany and abroad, and raises emissions in Germany.

To ensure that the Federal Republic can still meet its climate target by 2020, BUND is calling for the closure of lignite power plants to be ramped up considerably. To achieve emission reductions of at least 22 million tonnes, based on the government’s estimates, at least 5.5 to 6 gigawatts of capacity should be decommissioned. The right climate policy path will clearly only be found if more coal-fired power plants are closed down in the long term. The oldest power plants with the highest emissions should be removed from the grid first.

Regarding costs: Power stations should not in principle receive closure payments if they would have been removed from the grid anyway due to age and under safe conditions. The 0.7 gigawatts of power plants that would have been closed down by 2020 in any case should not be accounted for twice and definitely not receive compensation. In reality, even after the coalition decision on 1 July, a total of 3.5 gigawatts will be disconnected from the grid (2.7 plus 0.7 gigawatts). The power plants that will definitely be disconnected are Goldenberg, Frimmersdorf (sites P and Q) and Niederaußem (sites C, D, E and F). These have already been notified of closure6, have long since been considered uneconomic by the company, or have been reported to Bundesnetzagentur (an authority that monitors competition in the electricity, gas, postal, telecom and railway industries).

Any payments to power stations with reserve status must be in line with actual operating costs. There must be no golden handshakes for obsolete power stations; this would be hard to explain to the general public.
Given an operating lifetime of 50 years or more, many of the lignite power plants will have reached the age limit by 2020. This applies to power stations with a total output of two gigawatts. Whether these are closed down will naturally depend to a large extent on commercial considerations. But in the end it is very likely that electricity customers will have to pay for the closure of power plants that would in any case have been closed down in the next few years.

The dubious agreement with coal lobby will be expensive for the climate and the public.

Reinhold Pape
Sources:  Bund für Umwelt und Naturschutz Deutschland (BUND) – The Federation for Environment and Nature Conservation Germany (FOE Germany)
(BUND is one of the largest environmental organisations in Germany, with hundreds of local groups throughout Germany and over 530,000 members).