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Five reasons for a ‘coal exit’

by Dr. Uwe Lauber

“After the nuclear exit comes the ‘coal exit’”: this statement, made recently by Germany’s Environment Minister, Barbara Hendricks, underlines the leading role that Germany wants to play on the road to a climate-neutral global economy. In 2015, under the auspices of the Petersberg Climate Dialogue, German Chancellor Merkel called for environmental protection to be prioritised on the global agenda as part of a general move away from emissions-intensive, power-generation technologies.

Dumping coal would put Germany at the forefront of such a global transformation – nor would it be the first time. The country has already made a strong statement with its systematic expansion of renewable energies, as well as the decision in favour of a nuclear exit, which have turned it into the global trailblazer in terms of transforming the energy sources a country relies on.

Germany’s dedication to this cause was met with equal parts admiration and disbelief across the world as this new energy policy did not always dovetail with economic logic. Germany – for a long time – was the ‘solar world champion’, despite its often gloomy weather, and whilst it switched off some of what were arguably the safest nuclear power plants in the world, ironically the (in-many-cases-ageing) nuclear reactors of our European neighbours continue to operate just over its borders. However, looking at the big picture, there can be no doubt but that the German energy transformation has acted as an international beacon and played a major role in initiating the development of renewable energies globally, inspiring numerous copycats.

While the announced farewell to coal is being met with scepticism, here are five reasons why it is still the right thing to do:

1) The 1.5° target cannot be achieved without dropping coal. There is now a globally binding target for the first time in the history of the United Nations, which was set at the COP21 climate summit in Paris. Limiting global warming to 1.5° is an ambitious undertaking that will require a major effort from both established industry as well as developing countries if climate-neutral power generation is to be achieved by 2050. This can only be achieved by putting an end to coal power-generation.

2) No successful energy transformation can occur without eliminating coal. Or to put it differently: renewable energies aren’t enough – it’s all about the right back-up! This is what the years 2009 to 2013 demonstrated when German CO2 emissions increased for the first time in decades despite renewable energy increasing its market share. The reason? As a consequence of sinking prices in the electricity market, cheaper coal power displaced lower-emissions natural gas with significant consequences for Germany’s CO2 balance sheet.

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3) Clean coal plants are not economically viable. One reason for the success of coal is its low global price, ironically due in great part to the oversupply of natural gas in the US market. Another reason is that reduced levels of CO2 emission do not currently influence the market price due to, among other reasons, the wretched state of the EU emissions trading system. Accordingly, there is no incentive for reducing CO2 emissions. Otherwise, the efficiency losses of up to 30% that accompany the installation of filter technologies would have to be taken into account when calculating coal-plant profitability. Set against a backdrop of climate-neutral power generation, coal’s commercial advantage begins to evaporate.

4) Coal-fired power stations no longer have a place in a decentralised energy landscape. With the expansion of renewable energy, the profile of auxiliary power plants is changing. Coal’s traditional role has been to provide baseload power, a role that not only loses relevance with every new wind turbine and solar cell, but also costs hard cash. However, conventional power plants are slow to respond and can block up the grid. For this reason, in the first half of 2015 alone, renewable power generation valued at 150 million euros has had to be curtailed. Instead of the old baseload stations, modern gas-powered generating stations are needed that can react flexibly to the demands of the energy market, smooth out short-term variations in grid demand, and allow efficient operation with a multitude of load profiles. Such a scenario can be achieved via a modular design where multiple gas engines or turbines are added or shut down depending on load demand. The first such projects are already taking place in Germany involving power outputs of more than 100MW.

5) An exit from coal does not mean going it alone. Natural gas as a source of energy is on the rise worldwide. Back in 2011, the International Energy Agency (IEA) predicted the dawn of a “Golden Age of Gas”. At the current rate of consumption, global reserves will still last more than 250 years, and by 2035 at the latest, gas will have overtaken coal in importance for global energy production, according to the IEA. The most recent example of a country changing its energy policy is China who, in the course of the Paris climate summit, agreed to a substantial reduction of its CO2 emissions. As part of its efforts, Beijing is prioritising the substitution of coal for gas in power generation. This is because, as the “wind-power world champions” know, it can also be extracted in a climate-neutral way, namely via the power-to-gas process. The USA, during 2015 alone, dispensed with some 14 gigawatts of coal-generated power and replaced it with gas.

These five points show that the shift away from coal as an energy source is not only essential for reaching globally-agreed climate targets but is also essential for technologically upgrading our network of power plants. In a future that will be determined by renewable energy and efficient generation technologies, natural gas must and will occupy a key role. This is good news for the European industry as it is a global leader within the fields of gas turbines and gas engines. From an export perspective, there is simply no reason to cling onto coal.

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Dr. Uwe Lauber is CEO of MAN Diesel & Turbo

MAN Diesel & Turbo SE, based in Augsburg, Germany, is the world’s leading provider of large-bore diesel and gas engines and turbomachinery. The company employs around 15,000 staff at more than 100 international sites, primarily in Germany, Denmark, France, Switzerland, the Czech Republic, India and China. The company’s product portfolio includes two-stroke and four-stroke engines for marine and stationary applications, turbochargers and propellers as well as gas and steam turbines, compressors and chemical reactors. The range of services and supplies is rounded off by complete solutions like ship propulsion systems, engine-based power plants and turbomachinery trains for the oil & gas as well as the process industries. Customers receive worldwide after-sales services marketed under the MAN PrimeServ brand.