GWPF Newsletter: Germany Struggles To End Coal Power - Populist AfD Challenges Green Consensus

France To Cut Renewable Energy Growth

In this newsletter:

1) Germany Struggles To End Coal Power As Populist AfD Challenges Green Consensus
Bloomberg, 27 September 2018 
 
2) Green No More: Germany’s SPD Rejects Premature Date For Coal Exit
Deutsche Presse Agentur, 25 September 2018 

 
3) Merkel Accused Of Making 'Dirty Deal' With Automakers In CO2 Target Battle
Forbes, 26 September 2018  
 
4) ‘Angela Merkel Is A Lame Duck’ - German Chancellor's Authority Slips Away Amid Uprising Of Her Own MPs
Daily Express, 27 September 2018 

5) Forget Paris: France To Cut Renewable Energy Growth 
The Energy Advocate, 26 September 2018 
 
6) UN Chief Blasts World’s Failure To Stop Global Warming
Associated Press, 26 September 2018

7) Who Will Win Europe’s Energy Cold War? Russia And The U.S.
Mark P Mills, Investor's Business Daily, 26 September 2018

Full details:

1) Germany Struggles To End Coal Power As Populist AfD Challenges Green Consensus
Bloomberg, 27 September 2018 

Coal showdown reflects government’s floundering shift to renewable power.

Not far from Germany’s Rhine River, a fight to thwart giant excavators from grinding away what’s left of the 1,200-year-old Hambach forest came to a head this month as thousands of protesters faced off with police in a tense, and at times violent, showdown.

Activists formed a human shield by occupying dozens of self-made tree houses, set up barricades in the woods and threw stones and even Molotov cocktails toward police. The standoff revolves around utility RWE AG’s plans to extend a giant open-pit mine to dig up lignite — a soggy form of coal — for burning in local power plants in a short-term fix for Germany’s energy needs.


Police remove a protester from Hambach forest.
Photographer: Michael Gottschalk/Getty Images Europe

The conflict represents another challenge for Germany’s political establishment as it pits the country’s economic interests against goals of becoming an environmental leader in a 500 billion-euro ($590 billion) shift to renewable power. Those competing agendas are now colliding in and around Hambach — a district known as Rhein-Erft-Kreis — where concerns range from lost jobs and soaring electricity prices to the incessant hum of wind turbines and “electrosmog” from new power lines.

“I’ve got it all here, violent militants to law-abiding constituents rightly concerned about their power bills,” said Georg Kippels, a German lawmaker from Chancellor Angela Merkel’s Christian Democrats who represents the area just west of Cologne. “The next phase of the energy shift is an upheaval happening right here.”

The tensions are rooted back in 2000, when Germany put its “Energiewende” in place to overhaul its coal-dominated power infrastructure in favor of sources such as wind, solar and biomass. Then in 2007, the government pledged to slash carbon-dioxide emissions 40 percent by 2020 and unveiled a raft of subsidies and regulations to hit those goals.

Those grand, feel-good aspirations were further complicated in 2011 when Merkel decided to phase out nuclear power. That made coal and lignite, which still account for nearly 40 percent of German electricity, all but indispensable, even though the country wants to exit the fuel. The messy overhaul is now turning into painful reality for many.


A bucket wheel excavates soil and rocks at the RWE lignite mine.
Photographer: Alex Kraus/Bloomberg

  “It’s been very costly, but there’s not much to show for it,” said Colin Vance, an energy economist at the RWI research institute in Essen, Germany.

“Frustration’s growing among the public, coming to a boil where consumers feel the pinch of rising power prices and their neighborhoods being ripped up for new transmission lines.”

Kippels’ constituency of about half a million people is at the epicenter of the shift. Coal still supports thousands of jobs in the area but is being pushed out to make room for cleaner sources. Towering high-voltage masts are rising as part of a 40 billion-euro ($47 billion) electricity superhighway to transport wind power from the Baltic and North Sea coasts to manufacturing centers in the south.

If the government doesn’t show it can carefully balance climate protection with affordable and secure power, “it’s going to be a big challenge keeping voters on board,” said Kippels, 58, during a tour of his district where he’s increasingly struggling to defend the Merkel’s energy policy.

In last year’s federal election, support in the district for the populist AfD more than doubled to 9.5 percent, while CDU dropped 8.8 percentage points to 33.5 percent. Backing for the far-right party nationally has since surged and is the second strongest in some recent polls. Upcoming state elections will be the next test, with Bavaria and Hesse voting in October and the lignite centers of Saxony, Brandenburg and Saxony-Anhalt holding ballots in 2019.

In North Rhine-Westphalia, where Rhein-Erft-Kreis is located, the AfD’s Christian Loose says he’s watching developments in Hambach very closely and expects voters to become “more and more disillusioned” with climate-linked policy.

“Investors are benefiting, but what does it mean for industry and the ordinary man on the street? Nothing but higher energy costs and less security,” said Loose, the far-right party’s local energy expert, adding that the AfD wants to scrap support programs for clean energy.

RWE employs about 2,000 people at the Hambach mine on the constituency’s northwestern fringe. With two other lignite pits in the region, the company unearths 90 million tons of the low-grade coal annually to feed three power plants nearby. It has warned of potential outages without the expansion in Hambach, where the existing dig is coming dangerously close to the edge of the woods.

“The assumption that the forest can be saved is an illusion,” RWE Chief Executive Officer Rolf Martin Schmitz said on state broadcaster ZDF last week, adding that halting operations at the mine would cost the company as much as 5 billion euros.

Germany’s energy shift has left an indelible mark on the country’s utilities, which have hived off fossil-fuel operations. After completing an asset swap with rival EON SE, RWE will become Europe’s third-largest renewable power generator. Still, winding down lignite too quickly could lead to acute electricity shortages, according to the Essen-based company.

There is no immediate alternative to the cheap power from coal and lignite. Wind and solar energy can be expensive and need to be augmented by other sources when weather conditions aren’t favorable. Meanwhile, electricity generated from gas turbines risks increasing Germany’s dependence on supplies from Russia.

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2) Green No More: Germany’s SPD Rejects Premature Date For Coal Exit
Deutsche Presse Agentur, 25 September 2018 

Andrea Nahles, the leader of Germany’s Social Democrats (SPD) on Tuesday said that the government commission on phasing out coal should not set a date prematurely for the end of coal-fired power generation in Germany.

At the Day of German Industry in Berlin, Nahles said a coal exit date is impossible without security of supply, competitive electricity prices and future perspectives for the affected regions. These priorities must be adhered to by the Commission. Climate protection and the interests of industry and workers need to be reconciled. The Commission to phase out coal-fired power generation is to draw up a strategy for phase-out of coal-fired power generation by the end of 2018 and identify ways for structural change in the affected regions.

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3) Merkel Accused Of Making 'Dirty Deal' With Automakers In CO2 Target Battle
Forbes, 26 September 2018 

German Chancellor Angela Merkel has drawn the ire of climate activists, and her own environment ministry, after she came out publicly yesterday against an idea to raise proposed EU car CO2 limits for 2030.

 
German Chancellor Angela Merkel addresses the audience during a conference organized by the Federation of German Industries (BDI) on September 25, 2018 in Berlin. (JOHN MACDOUGALL/AFP/Getty Images)

The European Commission proposed last year new average fleet limits requiring a 30% emissions reduction by 2030. But earlier this month the European Parliament’s environment committee voted to raise this to a 50% reduction.

The final reduction requirement will depend on a vote by the European Council, the EU’s upper chamber made up of representatives of each of the 28 member country governments. 17 EU countries have come out in favour of the idea of increasing the Commission’s proposed reduction target for 2030. Germany’s environment minister Svenja Schulze had joined them in this call.

However yesterday Merkel publicly contradicted her environment minister, telling a conference of the German industry association BDI that the Commission’s proposed 30% should be maintained. She said a higher target would risk seeing automakers move production outside of Europe.

This was echoed by German Economy Minister Peter Altmaier, who said at the same event, "I'm not prepared to go beyond it". Schulze, from the Social Democratic Party (SPD) which is in a governing coalition with Merkel’s CDU, then said she accepts this outcome.

“The CDU systematically blocked tougher action on climate change, and Schulze and the SPD lacks the courage to fight for it,” fumed Benjamin Stephan, an activist with Greenpeace Germany, following the statements.

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4) ‘Angela Merkel Is A Lame Duck’ German Chancellor's Authority Slips Away Amid Uprising Of Her Own MPs
Daily Express, 27 September 2018 

Angela Merkel has been blasted as a “lame duck” by members of her own party in a unprecedented rebellion which threatens to teardown the German Chancellor.



After 18 years of being at the helm of the Christian Democratic Union (CDU), Mrs Merkel faced an “uprising” when MPs booted her right-hand man out of office.

The move, which saw parliamentary leader Volker Kauder ousted and replaced by Ralph Brinkhaus, exposed the chancellor’s fragility as she clings on to power.

A CDU adviser told the Financial Times “Kauder was the first domino to fall, but there might well be more.

“This could be just the start.

“I can imagine the entire senior party leadership coming under pressure to resign, and that includes Merkel.”

MPs also described the move as an “uprising against Merkel”.

Time is running out for the Berlin chief as she faces calls to step down from her 13-year premiership by Germany’s biggest-selling newspaper, Bild, who asked: “Can Merkel still be chancellor?”

European Budget Commissioner Günther Oettinger, also a key member of Angela Merkel’s CDU, said: “This is normal, she’s a lame duck.”

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5) Forget Paris: France To Cut Renewable Energy Growth
The Energy Advocate, 26 September 2018 

The French Government will drastically reduce the growth of its renewable spending in 2019, with the ecology ministry’s draft budget showing a 1.3% rise, which will effectively be flat after inflation.



Total spending on renewable projects will equate to €7.3 billion and will mostly go towards wind and solar schemes.

The move will force France to seek alternative forms of energy after last year France had to import UK coal power to fuel the country as temperatures plummeted in the winter months.

Furthermore, France has announced it is to cut its use of nuclear power in its energy mix as soon as possible following mounting concerns over its aging fleet of nuclear power stations.

The country is already falling behind on its long-term renewable targets and is being overtaken by many of its European rivals in the sector.
 
6) UN Chief Blasts World’s Failure To Stop Global Warming
Associated Press, 26 September 2018

The head of the United Nations blamed lack of leadership Wednesday for the world's failure to take tough decisions needed to stop global warming, warning that a key goal of the Paris climate accord is at risk.



U.N. Secretary-General Antonio Guterres bluntly told leaders gathered in New York that unless current emission trends for greenhouse gases are reversed by 2020, it will be impossible to keep global warming below 1.5 degrees Celsius (2.7 degrees Fahrenheit). The target was set in the 2015 Paris agreement, but the U.N. says government commitments so far only achieve a third of the emissions cuts needed.

"Why is climate change faster than we are?" he asked. "The only possible answer is that we still lack strong leadership to take the bold decisions needed to put our economies and societies on the path of low-carbon growth and climate-resilience."

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7) Who Will Win Europe’s Energy Cold War? Russia And The U.S.
Mark P Mills, Investor's Business Daily, 26 September 2018

Like an impetuous Prospero, President Trump stirs up tempests seemingly with little concern for the consequences. Speaking at the United Nations yesterday, Mr. Trump doubled down on the assertion he made this past summer at the NATO summit in Brussels when he warned that Germany could become “captive to” Russia because of the Nord Stream 2 gas pipeline.

Diplomatic style aside, there was method behind the U.S. president’s perceived madness. Mr. Trump knows Europe needs natural gas, and by playing on fears — merited or otherwise — that Russia is once again a threat to peace in Europe, he’s hoping Germany and the European Union will import more of it from the U.S.

Russian President Vladimir Putin has countered with a diplomatic charm offensive that’s included two meetings in the past four months with German Chancellor Angela Merkel — one last month lasting three and a half hours — and a recent visit to Austria where he brought a troupe of Cossack singers and danced arm-in-arm with Foreign Minister Karin Kneissl at her wedding.

Set aside Mr. Trump’s diplomatic offense, and Mr. Putin’s dancing skills, and what will likely unfold on the European front is a kind of energy realpolitik, where economic necessity and geopolitical reality, not ideology, wins the day.

The stakes are high for Russia. Oil and gas comprise the majority of its export revenues. The EU’s stakes are high too. Once Nord Stream 2 is operating, about 40% of all Europe’s gas imports will in fact come from Russia.

EU And Russia: Co-Dependents

Yet despite their co-dependency, the EU and Russia are — per the European Council on Foreign Relations (ECFR) — in “an open battle over the norms of international conduct.” According to a recent PEW survey, 78% of Europeans “lack confidence” that Russia would “do the right thing” when it comes to world affairs. As the ECFR also noted, winning this battle won’t come from “countering Russia” but from “improving Europe’s resilience.”

Mr. Trump sees opportunity in the Europeans’ distrust of Russia. The global energy sector has undergone massive upheaval, in large part because the U.S. is now the world’s biggest natural gas producer and a rapidly growing exporter. Until this transformation, the primary option for Europe in its quest to minimize Russian energy dependencies was the Middle East, with all the geopolitical baggage that entails.

Self-Interest Vs. Self-Interest

EU officials maintain that the U.S. is merely engaged in “self-interest” as it promotes its liquefied natural gas (LNG) exports. Of course it is. And Europe has its own self-interest here. It’s precisely when counterparties have mutual self-interests that sensible trade and business relations can be forged.

As it happens, Europe doesn’t need to build expensive LNG import terminals in order to take advantage of the energy transition in the U.S. The existing fleet of EU terminals is operating at one-fourth capacity. Using the full capacity would bring in nearly three times as much natural gas as the Nord Stream 2 pipeline is designed to carry.

In recent weeks, EU officials have indicated some receptivity to the idea of purchasing American LNG — as long as pricing is “competitive.” Yes, Gazprom pipes can deliver gas to Europe at a lower cost than even the record low prices associated with LNG ships from America. But EU leaders have elsewhere embraced policies that entail paying a premium for important non-price-related attributes: Here, resilience and diversity are worth something.

Based on the current price spread between U.S. LNG and Russian gas, even if Europe were to fill all its idle import capacity with American LNG, annual overall EU energy import costs would rise less than 5%.  In the long run, that would be a bargain as a resilience hedge. Perhaps EU’s diplomats could negotiate some of that spending as a strategic offset to increasing NATO dues.

LNG: Should EU Buy American?

There are those who believe that Europe could diversify by accelerating its alternative energy strategy. But even if wind, solar and other alternative energy sources exceed expectations, gas and oil will still be the main source of Europe’s energy for ages yet. Meanwhile, the imminent collapse in North Sea gas production will decrease Europe’s domestic supply by more than the capacity of Nord Stream 2.

How will this Cold War-like battle to supply Europe’s energy needs play out? Pragmatically, of course, with both a growing mix of LNG from the U.S. and gas piped directly from the Eastern Front. Bear in mind that neither Mr. Trump nor Mr. Putin—like their Cold War predecessors—will be around forever. Words like “captive” and “controlled,” with the right diplomatic underpinnings, could be replaced with “cooperation” and “partnership.”

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The London-based Global Warming Policy Forum is a world leading think tank on global warming policy issues. The GWPF newsletter is prepared by Director Dr Benny Peiser - for more information, please visit the website at www.thegwpf.com.