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9. COAL

Lignite power reserve

The 2016 Act on the Further Development of the Electricity Market called for two capacity reserves to serve as emergency supply in the event that the market fails to deliver enough electricity. In addition to a 2 GW technology-neutral reserve after 2020, it ordered the creation of a last resort reserve (known as “Sicherheitsbereitschaft”) of decommissioned lignite power plants that receive compensation to serve as backup for a period of four years. Eight lignite plants with a collective capacity of 2.7 GW were selected to enter the Sicherheitsbereitschaft reserve at a cost of EUR 1.6 billion (Raus, 2016). Importantly, the reserve can contain only power plants that are not part of the regular power market. The European Commission approved the capacity reserve under state aid rules in February 2018, and it entered into force in February 2019. Plants were taken off the market and directed into the reserve over the period 2016-19. After a plant has been in the reserve for four years, it will be decommissioned.

R&D and technology development

In the current discussions on a coal phase-out, the government does not anticipate offering exemptions for clean coal technologies. Still, the government offers some ongoing research support on power plant efficiency and on CO2 technologies, including carbon capture, utilisation and storage (CCUS). Germany is member of the international initiative, Accelerating CCS Technologies (ACT), which provides research funding for innovative CCUS projects. ACT launched its second call for project proposals in June 2018, for up to EUR 30 million (ACT, 2019). Moreover, a special working group for CO2 technologies was established as part of the German research network for Flexible Energy Conversion, which will include research on CO2 capture and utilisation (Kraftwerkforschung, 2019).

Germany is also considering options to convert older power plants into large, centralised storage sites to facilitate the expansion of renewable power. The existing grid connections of these plants would be considered an asset in this regard. Moreover, the conversion of these power plants would also be a source of economic activity in coal regions. The German Aerospace Center (DLR) is currently working on a pilot project with the German utility Vattenfall and start-up SaltX to replace the old boiler at the Reuter coal power plant in Berlin with a molten salt thermal storage tank that will be heated using excess renewable energy (Buchsbaum, 2019; Deign, 2019).

The Coal Commission also recommended the option to convert coal-fired power station sites in the coal mining region of Lausitz – expected to be hit the hardest by the coal phaseout – into modern industrial parks sourced by renewable energy.

Assessment

Coal is Germany’s third-largest energy source in TPES, and with 38%, is still the largest source for electricity generation. Germany’s coal demand fell rapidly in the early 1990s, but has since been relatively stable at around 80 Mtoe per year, with a slight decline in the last few years. In 2017, total consumption was 71 Mtoe; power and heat generation accounted for 79% of this.

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The phase-out will have large economic and social implications for some regions, which needs to be addressed as well. As the government decides on the recommendations of the Coal Commission, it should look at whether the large assets of the power plants that need to close can have a second useful life in supporting the energy transition, for instance by turning these facilities into large thermal storage sites that can support lower temperature district heating systems directly or electricity generation indirectly.

As coal is mostly used in power generation, the government might be tempted to finance the programmes to support the regions with a surcharge on electricity consumption, similar to the Renewable Energy Act (EEG) surcharge for renewables support. The IEA would caution not to burden the electricity price any further, as expensive electricity already hinders sector coupling, i.e. use of electricity in heat and transport to reduce the use of fossil fuels in those sectors.

Recommendations

The government of Germany should:

Allocate the costs of the coal phase-out in a way that does not increase the price differentials of energy use between different sectors (electricity, heat and transport), so as to not hamper sector coupling.

Investigate options for repurposing retiring coal plants and mines to provide zeroemissions sources of system services, for example thermal storage, to support the energy transition.

References

ACT (Accelerating CCS Technologies) (2019), “ACT – Accelerating CCS Technologies”, www.act-ccs.eu/.

Appunn, K. (2019), “Coal in Germany”, Clean Energy Wire, www.cleanenergywire.org/factsheets/coal-germany.

Argus Media (2019), “German coal and lignite phase-out”, Argus White Paper, www.argusmedia.com/-/media/Files/white-papers/german-coal-and-lignite-phase-out- 0219.ashx.

BMWi (German Federal Ministry for Economic Affairs and Energy) (2019), Commission on Growth, Structural Change and Employment: Final Report, Berlin, www.bmwi.de/Redaktion/EN/Publikationen/commission-on-growth-structural-change-and- employment.pdf?__blob=publicationFile&v=3.

Buchsbaum, M. (2019), “Germany plans to convert coal plants into renewable energy storage sites”, Energy Transition, https://energytransition.org/2019/05/coal-plants-into- renewable-energy-storage-sites/.

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10. Oil

Key data

(2018 provisional)

Domestic oil production: 71.1 kb/d, -27% since 2008 Net imports of crude oil: 1 719.8 kb/d, -19% since 2008

Domestic oil products production: 2 064 kb/d

Net imports of oil products: 384.2 kb/d, +69% since 2008 Share of oil: 32.8% of TPES and 0.8% of electricity generation

Consumption by sector (2017): 103.0 Mtoe* (transport 52.4%, industry 21.6%, residential 11.0%, commercial 6.9%, other energy 6.7%, heat and power generation 1.3%)

*Demand data are presented in energy units (Mtoe) for comparisons over different fuels and sectors.

Overview

Despite the country’s limited oil resources and stagnant domestic production, oil is still the most dominant energy source in Germany, accounting for 33% of total energy supply (TPES) in 2018. Germany’s demand for oil decreased slightly over the last decade but at a much slower rate than that of domestic oil production, continuing its heavy reliance on oil imports. Transport is the largest oil-consuming sector, accounting for more than half of total oil consumption; diesel is the primary oil product consumed, followed by gasoline and other gasoil used mainly for heating.

Germany has diversified oil supply sources, a well-connected supply infrastructure and a liberal market that contributes to maintaining the country’s strong security of oil supply. More progress on fiscal incentives, such as tax differentials and subsidies for lowemissions vehicles and associated infrastructure, can further support Germany’s oil security as well as the low-carbon transition by reducing demand for oil in the transportation sector.

Germany has consistently met the International Energy Agency’s (IEA’s) 90-day oil stockholding obligation, and its oil stock level is well above the minimum requirement. As of the end of May 2019, Germany held 122 days of net imports, equivalent to 240 million barrels (mb) (31 million tonnes of crude oil equivalent [Mtoe]).

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Germany has limited domestic oil production concentrated in the states of SchleswigHolstein and Lower Saxony. The only offshore production of crude oil comes from Mittelplate, located about seven kilometres off the Schleswig-Holstein North Sea coast (BMWi, 2019). Production from the two largest oil fields in Germany – Mittelplate and Dieksand – has dropped quite sharply since 2016 as the country’s total oil reserves continue to fall.

Figure 10.3 Oil demand by product, 2008-18

Germany’s total oil demand has been stable over the last decade with increasing diesel demand for transport.

*Other products include crude oil, “other” NGLs, synthetic fuels, Orimulsion, hydrogen, synthetic crude, refinery gas, aviation gasoline, naphtha-type jet fuel, white spirit, industrial spirit (specific boiling point [SBP]), lubricants, bitumen, paraffin waxes, petroleum coke, tar, sulphur, aromatics and olefins.

Note: LPG = liquefied petroleum gas.

Source: IEA (2019b), Oil Information 2019, www.iea.org/statistics/.

Oil demand has been stable in the last decade, after a 21% decline in the previous decade from 1997 to 2007. In 2018, Germany’s total oil demand was around 2 354 kb/d (Figure 10.3). Fuels for transport – diesel and gasoline – were the most heavily consumed oil products, with diesel accounting for 32% of total demand and gasoline for 21%. By absolute volume, demand for diesel showed the largest increase of 28% over the last decade, while that for gasoline declined by 14%.

Other gasoil and residual fuel oil, used mostly for residential and commercial heating, accounted for 20% (other gasoil) and 3% (residual fuel oil) in 2018. While other gasoil remained the third-largest oil product, its demand has declined significantly by 38% over the last decade; residual fuel oil demand marked the sharpest decrease of 60%. Naphtha, LPG and ethane are still minor oil products used as feedstocks for industry in Germany. In the last ten years, demand for naphtha fell slightly by 5% but LPG and ethane demand grew by 10%, with LPG accounting for 12% and ethane for 5% of total oil products demand in 2018.

In line with the oil products demand trend, the transport sector remained the largest oil consumer with over half of total oil consumption in Germany. Only the transport sector showed an increase in the share of total oil consumption from 47% to 52% in 2007-17 with small declines from all other sectors (Figure 10.4). The second-largest oil consumer was the industry sector, mostly chemicals and petrochemicals, which accounted for 22% of the

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10. OIL

Figure 10.5 Crude oil net imports by country, 2008-18

Germany has not only reduced the level of crude oil imports but also diversified import sources over the last decade.

Source: IEA (2019b), Oil Information 2019, www.iea.org/statistics/.

In terms of oil products, Germany produces most of its demand in domestic refineries. In 2018, it produced 2 064 kb/d of oil products, which covered 88% of total demand. However, Germany’s net imports of oil products have increased by 69% over the last decade to reach 384.2 kb/d in 2018 (Figure 10.6).

Of total imports (841.1 kb/d) in 2018, oil products mostly came from the Netherlands (48%), Belgium (18%) and Russia (16%). Imports from Russia increased by almost four times to 138.3 kb/d in 2018. Although still minor, the United States became a net exporter of oil products to Germany in 2010.

Germany’s oil products exports were 456.9 kb/d in 2018, which were delivered almost entirely to neighbouring European countries. The Netherlands accounted for the largest share at 22%, followed by Austria and Switzerland (16% each), and Belgium and Poland (10% each). Among those trading countries, Austria, Switzerland and Poland are net importers of Germany’s refined oil products.

Figure 10.6 Oil products net imports by country, 2008-18

Germany’s net imports of oil products increased by almost 70% over the last decade.

Source: IEA (2019b), Oil Information 2019, www.iea.org/statistics/.

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