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Closure of German Nuclear Plants Raises Concerns of Continued Coal Usage

The anticipated phase-out of coal in Germany may not result in the expected year-on-year decline in coal consumption due to the simultaneous closure of the country's nuclear fleet. The continued demand for coal could persist if there is a lack of additional Russian gas supply and/or a decline in LNG (liquefied natural gas) availability.

The European Energy Exchange (EEX) has projected that the total installed capacity for hard coal generation will decrease from 20.7 GW at the end of 2020 to 11.75 GW by the end of 2023. However, despite the reduction in the maximum capacity for German coal generation, power plants have been operating below their maximum capacities in recent years. This suggests that there is still room for a potential increase in coal-fired generation in 2022.

Germany has already experienced a decline in nuclear output this year due to the closure of three plants at the end of 2021, with a combined capacity of 4.05 GW. The remaining three nuclear plants in Germany (Isar 2, Emsland, and Neckarwestheim 2) with a combined capacity of 4.05 GW are scheduled to close at the end of 2022, completing the final stage of the country's nuclear phase-out. The German government and the research institute DIW believe that power security will not be affected by the coal and nuclear phase-outs. However, uncertainties remain regarding future capacity additions, particularly in renewable energy sources.

The performance of the German power network during periods of peak demand or low renewable energy output is still uncertain. Substantial additions of gas-fired capacity will likely be necessary before 2030 to compensate for the loss of baseload and flexible power supply. If the government's targets are fully achieved, onshore wind and solar capacities are expected to increase by 17 GW from 2021 to 2023, while installed gas capacity would rise by 4.6 GW. This could partially mitigate the decline in nuclear and coal generation. The utilization of the German hard coal fleet in 2022 will depend on factors such as wind generation, the economics of gas and coal, and overall power demand.


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