Back To Black: Coal Boom Clouds Europe’s Green Image

  • Date: 07/02/14
  • Stephen Fidler, The Wall Street Journal

Coal-fired power plants are being started up in Europe — and comparatively clean gas-fired power plants are being shut down.

The European Union sees itself leading the world in curbing carbon-dioxide emissions and doing more than any other region to mitigate climate change. But it is also increasing the share of electricity being generated by the most carbon-intensive energy source of all: coal.

Coal-fired electrical-generation plants are being started up in Europe—and comparatively clean gas-fired generating capacity is being shut down.

That is hardly what the climate doctor ordered—and it is part of what many experts see as an energy-policy mess that is weighing on the Continent’s industrial base. So who is to blame?

We could start with Americans. They have turned the energy world on its head by exploiting large amounts of shale gas—natural gas tightly embedded in rocks deep underground. As a result, natural-gas prices in the U.S. have fallen, displacing coal as the country’s least-expensive energy source.

Losing their home market, U.S. coal producers have sought buyers elsewhere. U.S. coal is now a cheaper fuel source than natural gas in Europe, so electricity generators are switching to coal.

According to one forecast cited at a Brussels conference on Thursday by Fabio Marchetti, head of government affairs in Brussels for the Italian energy company ENI, 10 gigawatts of gas-power plants will be dismantled in Germany by 2015—to be replaced with seven gigawatts of coal-fired plants. That is in Germany, the Continent’s leader in heavily subsidized renewable energy.

The other big cause is Europe’s faltering economy. That has contributed to a fall in carbon production and thereby to a drop in the price industry has to pay to emit carbon in the bloc’s carbon-emission trading system. Increased energy efficiency, thanks in part to European policy, has also reduced emissions. Bottom line: The low price of carbon has weakened incentives to avoid producing it.

The growth of coal-fired electricity generation may have another unwanted effect: undermining the stability of the electricity grid. Increasing the share of renewable energy in the generation mix—particularly from the sun and wind—means that a growing proportion of electricity output is intermittent.

To make sure there is always enough electricity when the elements don’t cooperate, generators have to keep other power plants ready to fire up. That is something gas-fired plants do. Coal-fired plants, on the other hand, need time to crank up. Thus, the combination of growing renewables and coal-fired generation could eventually reduce the reliability of the electricity supply.

Reducing gas use in electricity generation has a big impact on carbon emissions. An estimate from the oil major BP suggests that a 1% switch of electricity generation capacity world-wide to gas from coal would save as much carbon as an 11% growth in output from renewable sources.

These issues are on top of a lack of coherence of EU energy policy, guided in Brussels by two different departments, energy and climate change. In a recent report for the business association Business Europe, the Cologne Institute of Economic Research cited four often-conflicting policy instruments addressing climate change, renewables and energy efficiency. National policies also often aren’t joined up with EU-wide policy.

Some of these issues are likely to linger. Most forecasts suggest natural gas will still be significantly cheaper in the U.S. than in Europe in the long term. Gas is roughly three times as expensive now in Europe as in the U.S. The International Energy Agency’s central forecast scenario suggests “gas and industrial electricity prices in the European Union and Japan remain around twice the level of the U.S.” even in 2035.

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