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Hard coal continues to be crucial for security of supply

Over the course of 2021, it has become clear that security of supply is and will remain one of the most important topics of the energy transition. The expansion of renewable energies that are dependent on supply, wind and solar, is at the centre of energy policy. The continuously increasing share of renewable energies increases the need to hold on to the power we have available. An adequate, controllable and secure service has to be available during “slack periods”, i. e. periods with limited power from wind turbines and solar panels. And when there are prolonged slack periods, the neither electricity imports from neighbouring countries nor incentives for flexibility on the electricity demand side can meet the high demand in Germany. Hard coal can and will be a reliable partner for the security of supply in Germany for as long as it is still permitted – not only for power supply, but also in a transitional period for district heating.

To enable the transformation into a sustainable, secure energy supply and show companies and their employees prospects for the future, decisions on energy policy that also concern market design need to be made quickly.

The high demand for electricity owing to the recovery of German industry after the economic slump in 2020 brought about by the pandemic, along with the low availability of wind power, has significantly reduced the share of renewable energies in electricity generation. Hard coal has largely closed this gap and made an important and reliable contribution to electricity generation. In the first three quarters of 2021, the amount of electricity generated from hard coal increased by around 35 % to almost 37 TWh. At 8.6 %, hard coal made a significant contribution to security of supply, underlining its important role in ensuring that the energy transition is a success. For the calendar year 2021, the Coal Importers Association (VDKi), Berlin/Germany, expects hard coal imports to Germany to reach a level of 38 to 39 Mt, which is approximately 6 to 7 Mt more than the previous year.

On the world market for steam coal, China continues to be the dominant factor on the demand side. In the run-up to the celebrations for the 100th anniversary of the Chinese Communist Party, the country’s own hard coal production capacities were shut down for reasons of health and safety. Since the Chinese economy’s Covid comeback, these capacities are now lacking, but they are being structurally rebuilt. The restart after the pandemic is also causing problems for Russian hard coal exports, and rail logistics is currently falling far short of requirements. For Europe, the gap left by Russia is being filled with hard coal from South Africa, which, after a long absence from the market, is now increasingly pushing its way into the ARA (Amsterdam/Rotterdam/Antwerp) markets.

Despite the strong increase in global demand for hard coal, the German market has had a secure supply. The extremely fluctuating demand situation poses an enormous challenge for domestic logistics.

The price of hard coal, which has risen sharply since the start of the year has not led to a slowdown in hard coal demand. Since the price of the competing energy source natural gas rose much faster than hard coal, the use of hard coal is economically attractive despite the high cost in terms of CO2. As a result of this very volatile market situation, in particular due to the development of gas prices, the stock exchange prices for electricity have also increased significantly. (VDKi/Si.)