Germany’s energy transformation is not easy

A few days ago, German President Steinmeier took the last piece of coal from miners, and the last hard coal mine in Germany, Hanel Coal Mine in Ruhr District, was officially closed, marking the official history of hard coal mining in Germany. In order to achieve energy transformation, the German government has set ambitious transformation goals. However, how to solve the energy demand gap and cope with the rising energy prices? Germany’s energy transformation still faces many difficulties.

Structural Adjustment Begins Early

Hard coal and lignite power generation is an important source of electricity supply in Germany, but the exploitation of hard coal in Germany is increasingly lacking in international competitiveness. The industry suffers from long-term losses and needs government subsidies to survive. In 2007, the German government decided to phase out hard coal mining. With the formal stop of hard coal mining in Germany, the “old topic” of energy transformation has once again become the focus of social attention.

The concept of energy transformation began in the 1970s. After experiencing a series of energy market shocks such as the oil crisis, the concept of environmental protection has been rising, and Germany began to formulate energy transformation strategy. Initially, Germany’s energy transformation strategy was driven more by the consideration of energy supply security. However, with the increasing pressure of emission reduction and concerns about nuclear power security, the pressure of energy transformation in Germany has been rising.

In the Energy Planning 2010, the German Federal Government has formulated a strategic goal to completely realize environmental-friendly energy supply throughout the country by 2050. In addition, the German government hopes to reduce greenhouse gas emissions by 40% by 2020. In order to achieve this goal, the German government formulated the Environmental Action Plan 2020 in 2014, the core of which is the process of energy transformation in Germany.

PVA 0588 ( PVA BP05)

Structurally, the core work of Germany’s energy transformation mainly includes expanding the use of renewable energy, reducing greenhouse gas emissions and stopping the use of nuclear power. Under the background of vigorous energy transformation in recent years, renewable energy generation in Germany accounted for 33.1% of the total power generation in 2017. The overall goal of renewable energy formulated by the German Federal Government is to reach 18% of total energy consumption by 2020, 30% by 2030, 45% by 2040 and 60% by 2050. Among them, renewable energy accounts for 80% of total electricity consumption in 2050.

High Pressure on Supply Guarantee

Although the German government has set ambitious targets for energy transformation, public opinion is constantly calling for the process of energy transformation. However, Germany still has a long way to go on the road of energy transformation.

The first problem facing Germany is the challenge of energy supply. German oil and natural gas resources are scarce, and solar energy resources are relatively scarce compared with southern European countries. Therefore, Germany does not have an advantage in the use of renewable energy as a “congenital condition”. At present, traditional fossil energy, especially coal energy, still accounts for a large proportion in German energy structure. Data show that in 2016, about 40% of Germany’s electricity was supplied by coal resources, which dropped to 36.6% in 2017. At present, although hard coal mining has been stopped, the amount of lignite mining and utilization in Germany is still relatively high. In some areas, lignite mining is still the local economic pillar. Unlike hard coal, open-pit lignite mining is still a profitable business, and most of the coal mined is used in nearby pithead power stations.

In mid-2018, the German Federal Government set up a special committee on growth, structural transformation and employment (also known as the Coal Commission) to study and solve problems related to the abandonment of lignite. Recently, the committee said that it would come up with a specific plan on the schedule and related arrangements for the abandonment of lignite in Germany around February 2019. At that time, Germany will determine when and how to abandon lignite, which will also have a far-reaching impact on the German economy and society.

With the abandonment of lignite, Germany does not have many alternative energy options. Moreover, affected by the Fukushima nuclear power plant accident, the German Federal Government has decided to abandon nuclear power completely in 2022. Although this decision has been widely recognized, it has put great pressure on Germany’s energy supply and energy transformation. Data show that 11.6% of Germany’s total electricity generation in 2017 came from nuclear power. Although this proportion is not as high as coal, the time limit for abandoning nuclear power is quite urgent. In addition to the growing calls from all walks of life for abandoning coal-fired power in Germany, there are still many difficulties in fully using renewable energy to make up for the gap caused by abandoned nuclear power.


Economic development is constrained

What is more serious is that the contradiction between energy transformation and economic development is still difficult to reconcile.

Germany’s total abandonment of coal energy will have a decisive impact on the overall economic situation of a part of Eastern Germany, involving hundreds of thousands of jobs and regional economic development. To address the potential impact of coal abandonment, the Federal State of Eastern Germany asked the German Federal Government to allocate up to 60 billion euros in financial subsidies to the region in the coming decades. But not long ago, Federal Finance Minister Scholz said that only 1.5 billion euros of subsidies could be provided to the region by 2021. At the same time, the German economic community also proposed that the federal government should give appropriate compensation to the affected energy industry enterprises such as coal from financial and tax aspects.

Rising energy prices will constrain German economic development. Expert analysis points out that once Germany starts the process of abandoning lignite, energy prices will rise further. At present, German energy-intensive enterprises have complained about the rapid rise in energy prices in the past two years. The abandonment of lignite will make enterprises and ordinary residents face higher energy prices. This is a huge obstacle to enhance the competitiveness of German enterprises and stimulate consumer spending.

Although hard coal mining has become a history in Germany, there is still a long way to go for energy transformation in Germany. With the pressure of emission reduction, lignite abandonment and nuclear power abandonment being highly concentrated fermentation in a short period of time, the task of balancing economic development and energy transformation in Germany is very arduous, which will be a very serious challenge for the German federal and local governments.