Germany flirts with electricity crisis when phasing out nuclear and coal

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By Vanessa Dezem and Josefine Fokuhl

(Bloomberg) –

One of Germany’s biggest challenges in tackling climate change is keeping the lights on.

As Europe’s largest economy will shut down its last nuclear reactor next year, and utility RWE AG warns coal-fired power plants may shut down sooner than expected, critics say green energy is not added quite quickly. Germany’s ability to meet peaks in demand is set to decline rapidly over the next two years, increasing the risk of power outages.

In a final effort to salvage her reputation as “climate chancellor” before stepping down after next month’s elections, Angela Merkel has announced Europe’s toughest emissions targets. But the green energy revolution it led for nearly two decades is running out of steam as the electrification of the economy increases demand.

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“There is no doubt that security of supply must be at the top of the next government’s priority list and political action is urgently needed,” said Alexander Nolden, chief economist at RWE. “The new climate law is a real game-changer for Germany. This means a much higher ambition and will require a much higher speed for the necessary changes. “

Merkel admits her government was wrong. Demand for electricity is likely to grow more than official forecast by the end of the decade, she said in June. A month earlier, she had acknowledged that growing local opposition and excess bureaucracy had held back investments in green energy.

For a long time, Germany has shown the world how renewable energies can be added to form a substantial part of the electricity mix. Today, Norwegian electricity company Statkraft SF says it takes twice as long to build a wind farm in Germany as it does in the United States. .

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Take Roland Schueren. He runs 19 bakeries in western Germany and to save on electricity bills and speed up the energy transition, he wants to add more solar panels for his energy-hungry ovens and electric delivery vans. But the prohibitive rules hold it back. He is now aiming for a parliamentary seat for the Green Party.

“We can’t build more PV panels, our roofs are full,” he said by phone from one of his stores in Hilden, a small town outside Düsseldorf. “We could rent our neighbor’s roof and build more photovoltaic panels on it, but that’s not allowed. The energy transition is being slowed down by the government.

Merkel’s coalition still leads the polls, but the Green Party has emerged as a real candidate in the September 26 election. Utilities, energy traders and analysts are considering upcoming policy changes that could help meet the new target of a 65% reduction in carbon dioxide emissions by the end of the decade.

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RWE, which operates coal plants in Germany and abroad, said on August 12 that it was “conceivable” that the next government would revise the plan to phase out lignite, the dirtiest form of coal. Currently, the release is expected to be complete by 2038.

Sabrina Kernbichler, European energy analyst at S&P Global Platts, expects the phase-out to take place early in the next decade. This would require higher wind and solar generation for 2030 and beyond, as well as expanding grids to transport additional energy.

But the crisis could come much sooner. By 2023, the supply margin over peak demand is expected to plunge to 3%, or two gigawatts, from 26% before the pandemic, according to the BNEF.

And by 2026, output from coal-fired power plants could drop as much as 70% from pre-Covid-19 levels, the BNEF said. At the same time, energy use is set to return to pre-pandemic levels next year, according to BNEF. Demand would then increase by 4% by the end of the decade and up to 25% by 2040, according to the researcher.

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A squeeze in supply would drive up electricity prices for the thousands of businesses that form the backbone of the economy. Wholesale tariffs have already jumped almost 60% this year to reach their highest level since 2008. This increase will be passed on to the 40 million households in the country which already pay the highest bills in the European Union, in party to finance the energy transition.

Decisions to exit nuclear and coal were preceded by extensive research, a spokesperson for energy regulator Bnetza said. “The security of electricity supply is regularly reviewed.

In the state of Rhineland-Palatinate, which once housed two nuclear power plants, the head of the chemical company Berger-Lacke GmbH deplores the closures and worries about future supplies.

“Power outages are one of the biggest risks we face,” said Thomas M. Adam. “Even a few days without a stable power supply would be very serious. “

In the meantime, Germany may have to rely more on neighboring markets for imports. But the shutdown of fossil fuel power plants in other countries also means availability could be limited during severe winters, just when electricity is needed most, according to BNEF analyst Andreas Gandolfo. “In a collective crisis, Germany could find itself in a delicate situation.”

© 2021 Bloomberg LP

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