Germany Will Pay Its Utilities to Phase Out Coal

Germany will pay utility companies billions of euros to speed up the shutdown of their coal-fired power plants as part of the country’s efforts to fight climate change. Domestic lignite (brown coal) and imported bituminous (black coal) provide about a third of Germany’s electricity. According to German Finance Minister Olaf Scholz, operators of coal-fired power plants in western Germany will receive 2.6 billion euros ($2.9 billion) in compensation for turning their coal plants off early, and the country will pay 1.75 billion euros ($1.9 billion) for coal plant operators to do the same in the east. This compensation is in addition to around 40 billion euros ($44 billion) that the government has already promised to coal-mining regions to abandon the fossil fuel. Through this move, Germany plans to exit coal-fired generation by 2035–three years before the final deadline in 2038 for coal-fired electricity to be phased out.

It is unclear how the electricity coming from coal-fired power plants will be replaced in the future. The German government has set a target of generating 65 percent of Germany’s electricity from renewable sources by 2030. But, the country is also in the process of exiting nuclear power, with the last nuclear reactor set to go offline at the end of 2022. Experts indicated that Germany could not meet its 2020 or 2030 greenhouse gas targets, getting to an 80 percent reduction by 2050, unless the country kept nuclear power, which the Green Party had demanded be phased out as a condition for joining the coalition government back then. After Japan’s nuclear power accident in 2011, Berlin recommitted to the anti-nuclear component of its plan, shutting down eight nuclear power plants immediately, three more since and the last six by 2022. A study estimates that the benefits of closing its nuclear plants totaled $200 million per year, but annual costs increased between $10 billion and $12 billion.

As a result, Germany’s Energiewende (“energy transition”) has cost the country about $1 trillion Euros ($1.1 trillion) on “green” energy over the last 25 years. According to official calculations, close to 3,700 miles of new power lines are required to make Energiewende work. By the end of 2018, only 93 miles had been built. At the same time, the government has encouraged the purchase of electric vehicles–increasing the demand for electricity. And despite efforts to save energy, Germany’s power consumption has grown by 10 percent since 1990. At counter purposes with Energiewende, coal and natural gas made up for lost power from shuttered nuclear power plants, providing 2 to 3 terawatts more fossil-fueled electricity per month.

Further, renewable energy (wind and solar power) also has its own problems. Besides being intermittent and unable to generate power 24/7, there is the issue of decommissioning them. Germany has 29,000 wind towers. In 2018, Germany decommissioned 250 megawatts with the associated costly process of scrappage and decontamination. Close to 10,000 towers must be decommissioned in Germany by 2023. One strategy Germany has used is to ship some of the towers to Africa to generate power there at lower efficiency than when the turbines were new and operating in Germany.

Used solar panels have also been sold to developing countries when their efficiency has decreased. The International Renewable Energy Agency estimated that there were about 250,000 metric tons of solar panel waste in the world at the end of 2016 and that the figure could reach 78 million metric tons by 2050. Solar panels contain lead, cadmium, and other toxic chemicals that cannot be removed without breaking apart the entire panel. While disposal of solar panels has taken place in regular landfills, it is not recommended because the modules can break and toxic materials can leach into the soil, causing problems with drinking water. Solar panels can be recycled but the cost of recycling is generally more than the economic value of the material recovered.

Conclusion

According to Wolfgang Schäuble, President of the Bundestag, Germans will have to change their lifestyles, cutting back on holidays and paying a real price to master the challenge of climate change. They have already spent over a trillion dollars on decommissioning nuclear and coal-fired power plants and replacing them with wind and solar power. As a result, Germany’s residential electricity prices are among the highest in Europe. Many U.S. Democratic Party presidential candidates are proposing a bold rejection of economic freedom in the United States to embrace Germany’s command-and-control model. Central planning, however, is no match for the human creativity that Americans have demonstrated results in better economic, energy, and environmental outcomes.

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