Germany Passes Coal Phase-out Law

The German parliamentary vote July 3 to phase out coal from power generation is good news for gas, said German gas industry group Zukunft Erdgas (ZE), but there is a capacity shortage looming.

"Politicians have recognised the key role of natural gas in the energy transition. Because every watt of renewable energy must be backed by power plants in order to secure the supply during the dark," said Timm Kehler, ZE board member. "The law shows that the exit is also an entry means: namely in the generation of electricity with renewables and gas power plants."

The coal exit law provides for premiums for switching to gas power plants. However, these will not be sufficient to stimulate the expansion of gas power plants over a wide area. According to a study by the Energy Economics Institute at the University of Cologne (EWI), which was commissioned by the ZE, Germany could face a supply gap of 13 to 45 gigawatts (GW) without the expansion of additional gas power plants. Only 1 GW of gas power plant capacity is under construction and 0.9 GW is being planned at the moment.

“In order to escape the supply gap, we need a system that not only compensates for the production of electricity, but also compensates for the provision of capacities in case of need in the event of dark periods or peak loads. After the lengthy debate about the coal phase-out, the discussion must now focus on closing the emerging performance gap. Politicians must now introduce climate protection-oriented capacity mechanisms, " said Kehler.