Poyry: No new coal in Germany, Holland or Spain

A report by energy analysts Poyry for the UK’s Department of Energy and Climate change (DECC) has concluded that new coal plants in Germany, Holland and Spain are extremely unlikely.

The conclusion comes despite Germany’s recent decision to phase out its nuclear capacity and the recent collapse of the European carbon market – making coal burning more attractive.

The report concluded that rising costs, environmental opposition, new renewables, low electricity prices and the risk of high carbon prices in the future made new coal plants uneconomic in the three countries.

However it warned that existing coal – and especially lignite capacity – was likely to remain unless policies developed to phase it out.

Germany cancellations

The report focused primarily on Europe’s largest power market Germany, concluding “that there will be no new unabated coal or lignite projects in Germany for the forseable future.”

Germany recently built 2.7GW of Lignite capacity and a further 8GW of coal capacity is already under construction – but the report claims these projects started due to very different market conditions in 2007 and 2008, including an assumption that they would be given free carbon credits.

Since 2007 though four Lignite plants have been delayed indefinitely and a further 22 have been cancelled.

Renewables role

The report also found that coal use in Germany is decreasing – due to increased renewables generation.

Renewable energy is sold to the grid at a low cost – making it un-economic to run some coal plants.

Poyry concluded that increased renewable generation had reduced coal use in Germany from 21% in 2005 to 18% in 2011.

Lignite legacy

But the report notes that Germany lacks policies to phase out it’s Lignite coal plants.

Germany is the world’s largest producer of lignite or “Brown coal” which can be cheaper to produce but also less efficient and more polluting than conventional coal.

Because of it’s relative low cost – and the low European carbon price – lignite power plants in Germany still account for a quarter of all power produced – bringing total generation from both types of coal to 43%.

Whilst this may be challenged as Germany invests further in wind and solar power the report notes that 60% of Germany’s coal plants were built between 1970 and 1990 – making the fleet “relatively young”.

The report concludes that it will take until 2030 for German lignite capacity to fall below 20GW – with generation at that point dependent on the carbon price.