A pile of coal at Cirebon Port in West Java, Indonesia, on Wednesday, May 11, 2022. Trade has been a bright spot for Indonesia, which has served as a key exporter of coal, palm oil and minerals amid a global shortage in commodities after Russia’s invasion of Ukraine.
Germany is considering intervening in its energy markets to bring coal plants back online and conserve natural gas as it rushes to limit further disruptions from top-supplier Russia.
Parliament on Thursday plans to vote on a regulation that would provide compensation to coal-plant operators if the supply situation deteriorates. It’s part of a raft of government efforts to shore up Germany’s energy security as regional tensions rise amid Russia’s war in Ukraine.
“What we are doing here is leading Germany back into an energy-policy future,” Economy Minister Robert Habeck said during a parliamentary hearing, calling the measure a “sharp sword.”
Across Europe, governments are rushing to bolster their energy stockpiles ahead of the winter months, when demand for power and heating typically peaks. Russia has already cut gas supplies to a handful of countries and curbed flows on the Nord Stream pipeline, the biggest gas link to the continent. The pipeline goes offline for scheduled maintenance on Monday, and German authorities are concerned Moscow could use the opportunity to halt shipments for good.
The regulation would allow the government to limit generation at some gas plants if supplies of fuel are short. Worries about scarcity of supplies have contributed to a 25% jump in German power prices this week, capping a 400% rally in the past year.
Habeck said the drop in flows through Nord Stream will make it more difficult to meet a target for gas storage sites to be 90% full by November. Reserves are currently around 63% full.
Read: Germany’s Habeck Urges Canada to Help Thwart Putin on Gas
The new measure — which is part of a bigger energy framework package — will allow Germany to reopen 6.9 gigawatts of coal, 1.9 gigawatts of lignite and 1.6 gigawatts of oil capacity to boosts its energy security.
That would enable the country to cut the amount of gas used for power by 52% over the next 12 months, according to BloombergNEF estimates. Replacement of power plants will be allowed until March 2024.
“For utilities, the blow will not be as heavy since the economics of gas generation has been getting worse, and they’ve been making losses,” said BloombergNEF analyst Kesavarthiniy Savarimuthu.
Restarting dormant coal plants could be a boon for German energy giant RWE AG, since the facilities were meant to be shut, she added. “It’s a win-win situation — the government gets to reduce reliance on gas, while RWE benefits from higher margins from it’s revived plants.”
While replacing Russian gas is difficult for Germany — it depends on Moscow for about 35% of all gas it consumes — the country aims to become independent of Russian coal in the next couple of months. German lawmakers earlier Thursday also approved a package of reforms aimed at boosting renewable power generation.