Fritz Vahrenholt: Phasing Out Coal Poses Serious Risk For Germany

  • Date: 08/06/15
  • Fritz Vahrenholt, Manager Magazin

Whoever applies the axe must know that with the loss of German coal the vertically integrated value chains of metalworking, electrical engineering and chemical industry will start to falter.

The Norwegian sovereign wealth fund, one of the largest investors in the world, will no longer invest in companies that are dependent on coal for more than 30 percent of their business, according to the will of the Norwegian Parliament.

As the news media report in detail about the beginning phase-out of fossil fuels environmental activists are in a celebratory mood.

The boycott of companies by sustainability funds, whether in the tobacco or in the defense industries, however, has never meant that the products disappear. As long as profitable results are produced, capital will be invested in these industries.

It is interesting, however, where the approximately US$ 900 billion of the Norwegian sovereign wealth funds come from: It is the income from the lucrative oil and gas industry in Norway. The justification given for for the phasing-out of coal is the apparent effect CO2 emissions from the combustion of coal have on the climate. But by replacing coal with oil or gas, at least 50 percent of CO2 emissions will still be produced after all. The emissions from gas pipeline leaks by the more than 20 times more climate-influencing natural gas are not even included in this calculation.

But the Green environmental lobby in Germany has even more radical goal: carbon free is the goal, that is, away from coal, oil and gas. 100 percent of the energy should be generated from renewable sources. Are we really sure that wind turbines are the environmentally friendly energy production? To generate the same amount of electricity, they would need a land use with corresponding destruction of nature in astronomical proportions. In order to replace the electricity generated by the coal-fired power plant in Hamburg-Moorburg, the area of the entire state of Hamburg would be needed.

How realistic is it to generate not only electricity, but also heating and transport fuels, without fossil fuels worldwide (from China to Brazil) in the foreseeable future? In China, every 14 days, a coal-fired power plant is connected to the grid, and India is on the way to emulate its neighbour.

We will have to dispose electricity abroad more frequently

The German way of phasing out nuclear energy and coal is no convincing blueprint for energy generation in other countries.

Federal Environment Minister Sigmar Gabriel knows that an unchecked expansion of renewable energy will cause a cost avalanche of 1,000 billion euros. Tenants and people with a low income pay for the solar roofs of homeowners, high earners and farmers. The average three-member household has to pay 250 euros in subsidies annually. Let’s ask ourselves: why in the world do we need to expand the photovoltaic capacity to 52,000 megawatts (MW) in coming years in a country that has a solar radiation comparable to Alaska? Together with wind power, this would be then more than 100,000 MW with a peak load capacity of 80,000 MW in Germany in the winter and 35,000 MW in the summer. We will have to dispose electricity abroad even more frequently than today and forking out money to Austria, Holland, Poland and the Czech Republic, so that they take it off our hands.

Our neighbours do not particularly love this electricity, which sloshes over the border, because it destroys the profitability of the operating power plants located there. Pumped storage plants in Austria and Switzerland have fall into inefficiency. That cannot be our plan? But it is not only the excess electricity that is a problem. Wind and solar energy do not provide a secure capacity. Wind turbines generate only as much electricity as if they would run just 1,800 hours a year at full capacity. For photovoltaics, it is 800 full-load hours. The year, however, has 8,760 hours. In order to bridge a 10-day windless period, you would need an electricity amount from pumped storage power plants, which corresponds to the volume of Lake Constance, which is 500 square kilometres, according to a scenario of the German government.

China compensates the German CO2 reduction in two months

An additional network-technical challenge is often forgotten. In a highly developed industrial society, we need a second reserve at all times, whenever a steel plant is started up, when an ICE leaves the station, when the floodlight is turned on in a stadium. This second reserve can only be provided by generators of running large power stations, which automatically compensate for the demand in seconds. Germany needs about 15,000 MW of running conventional power plants at the moment. Photovoltaic and wind power plants are not able to do this.

To make matters worse, not one gram of CO2 is avoided with every newly constructed wind power plant and with each new solar roof. This is due to the fact that in Europe the emissions of CO2 is determined by certificate trading. When CO2 emissions are saved by a new wind power plant, then CO2 certificates are automatically released that are used for additional CO2 emissions somewhere else in Europe. Germany accounts for 2 percent of global CO2 emissions today, China for 27 percent and rising. To put it bluntly: the contribution of CO2 reduction through an often requested phase-out of brown and hard coal in Germany is offset by the growth of emissions in China within two months.

No nation on earth will follow us

But why do we push for a hasty energy policy with great dangers for Germany’s social cohesion, industrial competitiveness and our environment? It is driven by fear. It is driven by the fear that we destroy our climate with CO2.

But there is mounting scientific evidence that the climate impact of CO2 has been over-estimated immeasurably by the IPCC. For 16 years there has been no significant global warming despite the fact that during this period one third of the historic man-made CO2 emissions were produced and the CO2 content of the atmosphere is rising year after year. The climate models, with all of their forecasts have been proven wrong, cannot calculate the natural fluctuations of the climate.

The 60-year cyclical ocean currents have contributed half for heating of the period 1978-1998 and now that they have moved into their cool phase, no significant warming is expected by 2030. Another cooling contribution is provided by the sun that was in one of its most active phase for 1000 years in the second half of the last century and has now entered an extraordinary period of weakness, which we have not experienced for 200 years. Yes, CO2 is a climate-influencing gas, but it will increase the average global temperature on earth by 2100 by no more than 1 to 1.5 degrees Celsius.

Nature gives us plenty of time to put our energy system on a sustainable basis. Why then a rush into unilateralism which puts so much at stake? No nation on earth will follow us when it becomes clear that our industrial base is destroyed and our citizens are overburdened financially.

Death knell for the sole German energy source

The Norwegian decision aims rather on short-term political applause. But investors should pay only limited attention to trends. The bankruptcies of SolarWorld, Ersol, Windreich, Prokon, Juwi, and Solon show us how vulnerable business models are that depend on the state subsidies.

In addition to the destruction of capital, there remains a grandiose destruction of thousands of jobs. But that does not prevent the Green State Secretary Rainer Baake in the Federal Ministry of Economics to ring the death knell for the only German energy source that does not require subsidies, namely lignite. He wants an additional penalty tax on CO2 alone from German coal power plants. If the penalty tax means that electricity is generated in more expensive gas power plants, the energy costs will increase but, due to the emissions trading scheme, European emissions will not fall: it just means less German CO2 emissions and more non-German CO2 emissions. All you do is shooting yourself in the foot – nothing more. If the coal power plants continue to be operated despite the penalty tax, electricity costs will also rise and the emission certificates are bought by the proceeds of penalty tax.

The creeping process of de-industrialization has already begun

In order to trigger a change of fuel from brown coal to gas without Baake’s kneecapping, CO2 prices would almost have to increase tenfold, which would have a devastating effect on the price of electricity and the competitiveness of energy-intensive industries. The future of gas prices are barely calculable while the domestic production of lignite is safe and cost-stable and completely untouched by world market conditions. Lignite from the Ruhr mining area and the Lausitz area is the guarantee for the preservation of the German energy-intensive industry, like the production of steel, copper, silicon or aluminium, like the basic chemicals or the production of industrial gases such as oxygen, hydrogen, chlorine or ammonia. Whoever applies the axe here must know that with the loss of these productions the vertically integrated value chains of metalworking, electrical engineering and chemical industry will start to falter. Germany’s electricity costs for industry are already 26 percent higher than the EU average. Compared to the U.S., the difference is 150 percent now. The creeping process of de-industrialization has already begun. The winners of our job losses will be the USA and the Far East.

A fundamental reform of the Renewable Energy Act is required, the costs are to be limited and the extension of renewable energy must not resume until balancing power plants, storage and networks are available in sufficient capacity. Renewable energy will have a future, where they can generate competitive electricity and where the national grid can transport the electricity to the consumers. The subsidising of old-fashioned technologies through feed-in tariffs has to be replaced by a massive promotion of new technological solutions. Innovation engineers and start-ups must be backed but no longer the project developers and fund owners who connect a wind or solar park to the grid for the 100th time, without having to worry about when and where the electricity can be fed into the grid. The Renewable Energy Sources Act in the present version supports the old hats of the last decade, does not provide any CO2 reduction and erodes the competitiveness of German industry. It is not an export hit but an obsolete model, the consequences of which can barely be managed.

Perhaps the Norwegian politicians – but, above all, the German politicians – should think about this.

Fritz Vahrenholt is a former Environment senator of Hamburg. He was the executive for renewable energy at Deutsche Shell, founded the third-largest German wind turbine manufacturer Repower and led Renewable Energies in the energy group RWE. From 2001 to 2007, Vahrenholt was a member of the Sustainability Council of Gerhard Schröder and Angela Merkel. Vahrenholt is a member of the Senate of the Fraunhofer Society and a member of the Academy of Science Acatech. He is a member of the Supervisory Board of the copper producer Aurubis and author of the climate sceptical book “The Cold Sun”. Since 2012 Vahrenholt is CEO of German Wildlife Foundation. 

The lack of significant global warming in the past 16 years, mentioned by the author, has become controversial among climatologists. The “pause” in global warming was, so a new study, the result of misinterpretation of the temperature measurements.

Manager Magazin 5 June 2015

Translation Philipp Mueller

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