How Merkel’s Green Energy Policy Has Fueled Demand for Coal

By 2030, the eastern German town of Poedelwitz will likely be razed to get at the rich veins of coal beneath its half-timbered houses. The reason: Chancellor Angela Merkel’s effort to steer Germany toward greener energy, which has unexpectedly meant booming demand for dirty coal.

 While Merkel aims to wean the country from nuclear power and boost renewable energy, the shift has been slow—Germany’s 140-plus coal-fired plants last year supplied 40 percent of the country’s electricity—and Poedelwitz is flanked by open-pit lignite mines that feed a 2 gigawatt power plant a few miles away.

“This is unparalleled destruction of the environment,” says Jens Hausner, a farmer who has seen 17 of his 20 hectares consumed by digging equipment that looks like something out of a Mad Max movie. In a bit more than a decade, the hulking machines are expected to claw through the town’s 13th-century church and 40 or so remaining homes. 

Jens Hausner
Photographer: Krisztian Bocsi/Bloomberg

Fine-tuning the shift toward cleaner energy will be near the top of Merkel’s to-do list if she wins a fourth term as chancellor, as expected, in Sept. 24 elections. Germany began subsidizing wind and solar in 2000, but the pace picked up after 2011, when Merkel initiated her “Energy Shift” in reaction to the meltdown at Japan’s Fukushima plant.

Merkel aims to cut CO2 emissions by 40 percent by 2020 from 1990 levels, and Germany has spent some 650 billion euros ($780 billion) on subsidies for green power in recent decades. But the country will at best get to 30 percent by 2020, according to Berlin climate researcher Agora Energiewende. Emission reductions “won’t be a near miss but a booming failure,” Agora researchers write.

That’s not to say Merkel’s policy has been a failure. Wind power alone has spawned 143,000 jobs, according to the BWE wind industry lobby, versus 135,000 who work in the traditional power sector and coal mining. More than a third of Germany’s electricity now comes from wind, solar and biomass, up from a quarter four years ago. And Germany is ahead of the European average, with emissions down 27 percent from 1990 levels, versus 22 percent for the 28 members of the European Union.

Merkel’s government says clean power investments will make Germany a global leader in the technologies, giving its manufacturers an edge for decades to come.  “For all the challenges of the Energy Shift, we’re on track to be at the forefront of a radical switch from a carbon-powered economy, ” her chief of staff, Peter Altmaier, said in an Aug. 29 speech in Leipzig.

The Siemens plant in Cuxhaven
Photographer: Schlüsselburg/Stadt Cuxhaven via Bloomberg

The upside to the Energiewende can be seen in the North Sea port of Cuxhaven. Within a couple of years, about 1,000 people will work at Siemens AG’s new $240 million plant that manufactures massive turbines there. Those will be towed out into the windswept waters of the North Sea, where they’ll be mounted atop towers made a few hundred meters away by Ambau GmbH.

“We’ve benefitted from the Energy Shift, no doubt,” says Ulrich Getsch, mayor of Cuxhaven, which prevailed over scores of bidders to win the Siemens plant. There’s plenty of room for other green energy companies at the site, says Getsch, who aims to make the town “the hub of a boom.”

Ulrich Getsch
Photographer: Brian Parkin/Bloomberg

Yet the prosperity enjoyed by Cuxhaven and a handful of other towns has been fueled by generous government funding. Klaus Schaefer, chief executive officer of German utility Uniper SE, says subsidies have done little to rein in carbon emissions while forcing German companies to abandon valuable equipment. “It’s difficult to see a lot of winners from the energy transition,” Schaefer says.

Consumers bristle at the cost as Germany has the European Union’s second-highest rates for electricity after Denmark. A green surcharge raises German power bills by some 25 percent, to an average of about 29 euro cents (34.6 U.S. cents) per KW-h this year—more than triple the level in the U.S.

That has spurred members of Merkel’s Christian Democratic Union to consider alternatives to subsidizing clean power. Her coalition this year sought to limit the number of new plants eligible for subsidies and auction off the right to build them to bidders who demand the lowest level of state support. And some CDU lawmakers have proposed direct subsidies funded by taxes.

“In the past everyone has been able to make money, whatever the technology,” Leonard Birnbaum, a management board member of utility E.ON SE, said at a September energy conference in London. “We can’t expect subsidies for eternity.”


QuickTake: Coal's Slow Global Decline


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