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Germany’s Rush To Ditch Coal Is Great News For Norway

This weekend, Germany became the latest large European economy to lay out a plan to phase out coal-fired power generation, aimed at cutting carbon emissions—a metric in which Berlin has been lagging in recent years.

A government-appointed special commission at Europe’s largest economy announced on Saturday the conclusions of its months-long review and proposed Germany to shut all its 84 coal-fired power plants by 2038

While Germany will mostly seek to replace coal capacity with renewables, the country’s suppliers of natural gas expect to benefit from the coal exit because natural gas-fired capacity could offer steady supply.

Norway, currently Germany’s third biggest natural gas supplier after Russia and the Netherlands, expects demand for gas in Germany to increase, Irene Rummelhoff, member of the executive committee and Executive Vice President, Marketing, Midstream & Processing (MMP) at Equinor, told Reuters last week, before the German ‘coal commission’ announced the conclusions of its report.

Norway and Equinor compete with Russian gas supplies. Then there is the possibility that the Gazprom-led Nord Stream 2 pipeline project between Russia and Germany via the Baltic Sea become operational, despite all the controversies surrounding it and the steady opposition from the U.S. and some EU states like Poland and Lithuania.

Still, Equinor believes that there would be a larger market for its gas in Germany, because Berlin—also on track to shut down nuclear capacity by 2022—can’t start running on renewables only while it also phases out coal, according to Equinor’s Rummelhoff. 

“I think it could be an increasing market for us going forward,” the manager told Reuters at an industry event in Berlin. Related: Russia-Ukraine Enter Gas Transit Talks

“The quicker the phase-out (of coal), the stronger the demand for gas as I see it because there is no other viable alternative,” Rummelhoff added.

The residential heating sector and the public transport sector are expected to need more gas, according to Equinor’s manager.

Germany, where coal hard coal and lignite combined provide around 35 percent of power generation, has a longer timetable for phasing out coal than the UK and Italy, for example—who plan their coal exit by 2025—not only because of its vast coal industry, but also because Germany will shut down all its nuclear power plants within three years.

The government ordered in 2011 the immediate shutdown of eight of its 17 reactors in the wake of the Fukushima disaster in Japan, and plans to phase out nuclear by 2022.

The closure of all nuclear reactors in Germany by 2022 means that Germany might need to retain half of its coal-fired power generation until 2030 to offset the nuclear phase-out, German Economy and Energy Minister Peter Altmaier said last week.

According to the coal commission’s phase-out proposal—which needs the approval of the government— some 24 coal-fired plants will be shut by 2022. Then, by 2030, Germany is expected to still have eight coal plants operating, Los Angeles Times’ special correspondent Erik Kirschbaum writes.

The commission also proposes the timetable and targets for the coal phase-out to be reviewed every three years and the final coal exit could be pushed forward to 2035, if possible. Related: There’s No Slowing U.S. Natural Gas Production

The commission proposals would have serious consequences for RWE’s lignite business, Germany’s largest utility said on Saturday.

“The Commission’s recommended end date of 2038 for coal-fired power generation is far too early for the company. It is therefore reasonable to re-examine this date in 2032,” RWE said in a statement, noting that an extension should also be considered, in order to ensure security of power supply.

Last year, renewables beat coal as the main source of Germany’s energy for the first time ever, taking more than a 40-percent share of power generation.

Going forward, renewables are expected to account for a growing share, but Germany’s suppliers of gas also see opportunities in replacing coal because of what they view as more reliable supply than intermittent renewables.

Norway and Equinor will have to compete with Russia for a larger share of the German natural gas market, as well as with liquefied natural gas (LNG) projects in the works in Germany.

According to Equinor’s Rummelhoff, Germany’s rationale for LNG terminals is diversification rather than capacity.

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on January 28 2019 said:
    This the more reason why Germany has been adamant in its support of the jointly European and Russian financed Nord Stream 2 gas pipeline which once completed by the end of 2019 will deliver along with the already existing Nord Stream 1 a total of 110 billion cubic metres per year of Russian gas supplies under the Baltic Sea, to Germany and the EU thus bypassing the Ukraine.

    Germany is on the way to phasing out coal-fired generation by 2038 with the aim of cutting carbon emissions and also phasing out nuclear electricity by 2022.

    While Germany will mostly seek to replace coal and nuclear energy with renewables, it will still need a lot of gas supplies as Germany can’t for the foreseeable future run on renewables only.
    Last year, renewable energy accounted for more than 40% of Germany’s power generation beating coal in the process.

    Going forward, renewables are expected to account for a growing share, but Germany’s suppliers of gas like Russia and Norway also see opportunities in replacing coal because of what they view as more reliable supply than intermittent renewables.

    Germany considers Nord Stream 2 first and foremost an economic project which will bring uninterrupted and cheap Russian gas supplies to Germany and the EU thus ensuring energy security for the whole of the EU. Therefore, Germany will never abandon the project despite US opposition.

    Still, Germany is expanding its LNG infrastructure as part of its diversification of energy sources and fast-rising demand for gas in the country. Germany and the EU will only buy US LNG if its price matches the cheaper Russian piped gas.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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