Less than two years ago, Chancellor Angela Merkel’s government dubbed lignite East Germany’s “black gold.” Last week, she reached a deal with utilities that analysts at Berenberg and B. Metzler Seel Sohn & Co. see as the start of the phaseout for the dirtiest power-plant fuel.
“The federal government is taking its gloves off,” Guido Hoymann, an analyst at B. Metzler, said by phone from Frankfurt. “That’s the beginning of the end for this type of energy production. The first step is being made.”
RWE AG, Vattenfall AB and Mitteldeutsche Braunkohlegesellschaft mbH agreed to close plants corresponding to 12 percent of the nation’s total lignite generation capacity in a 1.6 billion euro ($1.8 billion) accord as Germany is falling behind its target to cut carbon emissions. For the remaining 56 units, it’s a question of when they will be forced to shut, Lawson Steele, an analyst at Berenberg, said by phone from London.
Lignite, a sedimentary rock formed from compressed peat, has been a mainstay of German power generation for almost a century and helped underpin growth in Europe’s biggest economy. But reliance on the fuel poses a dilemma: Germany needs to meet its targets for cutting carbon dioxide emissions through a shift to renewable energy, while ensuring stable power supply at times when there’s no sun or wind.
The plants aren’t being dismantled immediately. As Germany is pushing ahead with its exit from nuclear energy by 2022, the eight coal units will still be available if needed to meet demand.
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