Verein der Kohlenimporteure e.V.

“It is irresponsible to talk about the end of hard coal without having reliable alternatives”. This is what Alexander Bethe, Chairman of the Board of the Coal Importers Association (VdKi), Berlin/Germany, said at the traditional New Year’s reception of his association in Hamburg. “Politics must be honest with itself. There is no way around coal as a mainstay in the medium term”.

Instead of discussions about shortening operating times, the focus should be on expanding the grids and storage facilities. “We need a reorientation of energy policy and an immediate lifting of the anticipatory fuel bans: first build up green technology, then switch it off. And not the other way around,” says Bethe.

The discussion that coal is only needed for one or two winters is unrealistic and counterproductive. This will not convince logistics companies in the long term to invest more in means of transport and more staff. After the stop on Russian coal, his industry reacted very well. In a short time, the industry switched to alternative types of coal. The trade has set new priorities: USA, South Africa, Colombia.

Gas will remain expensive, as 100 bn m³ of pipeline gas will have to be replaced in Western Europe. LNG export capacities and means of transport do not fall from the sky. The new fleet of gas-fired power plants envisaged as a bridging technology is so far only in fragments.

Chancellor Scholz had spoken of a turn of an era. Bethe: “The turn of an era in the energy sector must include that the bitterly needed hard coal will accompany the energy turnaround for longer”. CO₂ capture and storage (CCS) for coal-fired power plants should not be excluded.

On the figures: Global coal consumption could reach a new record high of more than 8 bn t in 2023. Germany will import about 43 Mt of this (steam coal, coking coal, coke). That is about 0.6 % of world production.(VDKi/Si.)

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.)

In its final report, the commission failed to mention a single word on coal’s contribution to reducing CO₂ emissions, even though coal has been the main contributor to emission reductions in recent decades. By the end of 2018, it had cut its use of fuel for electricity generation by half in comparison with 1990.

The commission has nevertheless recommended reducing the output of coal-fired power stations by 7.7 GW to around 15 GW by 2022. This recommendation is not only completely unrealistic, but shows how the representatives of regions, economy, unions and environmental associations have united against coal as an energy source, which is not represented on the commission. They are also violating the objectives of climate policy, economic affairs and reliability of supply.

Coal-fired power stations are the existing, economical bridge solution for the energy transition. They balance out the fluctuating supply of renewable energy sources. Whether the necessary capacity of open gas turbines will be available by 2022 is highly uncertain. What is certain, however, is that this will incur additional costs that could definitely be avoided. Open gas turbines have a lower efficiency than coal-fired power stations – from a climate policy perspective, this measure is counterproductive. It is making the energy transition more expensive and deeming it necessary to reduce the burden of these costs on the economy. Economic representatives should never have allowed these senseless costs to be incurred in the first place.

As world export champion, Germany cannot cut itself off from the rest of the world when it comes to energy economy. Coal is available without political risk around the world. Natural gas is not only associated with political risk but will make energy supply in Germany more expensive unnecessarily.

It its final report, the commission reduced the “coal economy” to those working in power stations and, as such, ignored those working in both trade and logistics. In the Ruhr region and the Saarland, there are many coal-fired power stations that have either been shut down over the past few years or are still in operation. These regions have long since been victims of the structural change and require urgent support. Instead, this support is flowing into regions with much lower unemployment figures than the Ruhr region. This is clearly tactical from an electoral perspective but has nothing to do with the task of the commission.

Nor can this be justified by the fact that the commission was very late to “discover” coal. In its interim report on possible measures for social and structural political development in the lignite regions, dated 25th October 2018, the commission admitted that its work had only previously focussed on the structural change in the lignite mining areas. It still only considered lignite mining areas, however, when attempting to avoid structural interruptions. Coal remained an “if necessary” option in the interim report, while the final report contained a few suggested projects on structural development in the Saarland. (VDKi/Si.)

In order to ensure the reliable supply of power in Germany during the energy transition and to compensate for fluctuations in renewable energies, the flexibility of thermal power stations will become extremely important in future, particularly in partial load operation. Coal power stations are already predominantly used to compensate for fluctuating renewable energies on account of their flexibility.

A study by renowned consulting firm Pöyry Management Consulting, presented by the German Coal Importer Association (VDKi), Hamburg/Germany, investigated the direct and indirect greenhouse gas emissions generated during electricity production at coal and gas power stations. Partial load operation, which is particularly important for compensating for fluctuations in renewable energy supplies, was also taken into account. Within the scope of the analysis, extensive international studies of emissions in the extraction and transport of coal and natural gas were compared and evaluated. If these indirect greenhouse gas emissions are added to those generated during electricity production in the power stations, taking into account coal and gas procurement for Germany in 2014, it was revealed that in a partial load operation scenario the direct greenhouse gas emissions from electricity production in open gas turbines is up to 76 % higher than in modern coal power stations. The difference between greenhouse gas emissions in modern coal power stations and gas-and-steam power stations, without heat extraction, drops from 36 % under full load to 30 % under partial load.

If we include the greenhouse gas emissions generated during the extraction and transport of the two energy sources, partial load electricity production in modern coal power stations, combined with the varying electricity demand for current -German power station complexes, is clearly a much more environmentally friendly alternative to open gas turbines for compensating for the fluctuating supply of renewable energies. Although these turbines are only a short-term provision for load compensation, they cause significant losses in energy efficiency and have an adverse impact on the carbon footprint. Even in the case of direct emissions, without taking into account the extraction and transport of the fuel, an open gas turbine produces up to 29 % more greenhouse gases during partial load operation than a coal power station.

In the ongoing discussion regarding the best bridge technology during the energy transition, natural gas is currently the preferred energy source among politicians and members of society due to the fact that it is purported to have a better carbon footprint. The results of the Pöyry study indicate, however, that this is based on incorrect assumptions. When it comes to achieving global climate targets in particular, indirect emissions that are generated during the extraction and transportation of the various energy sources must also be taken into account. When considered holistically, particularly in terms of partial load operation, coal is actually a better option than natural gas, which has been assumed to be more environmentally friendly.

In addition to CO₂ emissions, the Pöyry analysis also considers the emissions of the greenhouse gas methane, which are produced during the production, transport and processing of both shale gas and conventionally extracted natural gas. Over a period of 100 years, methane has 28 times the global warming potential of CO₂. After the world climate conference in Paris,/France when it became clear that there was an urgent need for action, Pöyry based its CO₂ equivalent calculations on a period of 20 years. In this case, the global warming potential of methane is actually 84 times higher than that of CO₂.

The key components in the emissions generated by electricity production are therefore the direct combustion process (CO₂), the energy required for transport (CO₂) and the amount of methane generated during extraction and as a result of leaks. The concentration of the greenhouse gas methane in the atmosphere has increased significantly since 2006. The Karlsruhe Institute of Technology (KIT) has recently proven that the extraction of oil and natural gas, particularly in the USA, is responsible for this. Following a leak in a large gas tank in the Aliso Canyon, California, at the start of the year, in which 77,000 t of methane was released into the atmosphere, the public became more aware of the relevance of this greenhouse gas, which is far more potent than CO₂.

“As a result of the priority feed-in of renewable energy sources, fossil-fuelled power stations will increasingly take on the role of compensating for fluctuations and network stability. They will therefore be increasingly operated under partial load,” says Roland Lorenz, energy expert and Managing Director of Pöyry Management Consulting. “According to the results of the study, coal power stations are the more environmentally friendly alternative to open gas turbines in this load range.” Efficient gas-and-steam power stations generate electricity in parallel with the generation of heat, i. e. for district heating systems, and cannot therefore respond as flexibly to fluctuations as is necessary for the energy transition. In the current energy market, they are therefore built almost exclusively to meet heat requirements and not to compensate for load peaks. Only open gas turbines that are not connected to a steam process have the flexibility required for network stability during the transitional period until the development goals for wind and photovoltaic plants are met and until the storage problem has been resolved, although these do not perform as well as modern coal power stations in terms of efficiency and therefore greenhouse gas emissions.

The results of the study underline the political pressure to act: Electricity production from coal is just as suitable as electricity production from natural gas for use as a flexible bridge technology until the development goals for wind and photovoltaic plants are met and until the storage problem has been resolved. Public perception, however, is another matter. Political figures continue to advocate electricity production from natural gas, which supposedly has lower emissions. The problem is that the debate on greenhouse gases only takes into account direct emissions and the overall efficiency of highly efficient gas-and-steam power stations with power and heat diversion. It is important to distinguish, however, the type of load operation and technology required. Obviously the emissions benefits of coal power stations in partial load operation have not been considered. In order to secure the power supply in Germany in the medium term without increasing emissions while retaining the necessary flexibility in the operation of thermal power station complexes, all available energy sources need to be used economically. Fair competition must also be guaranteed between fossil fuels in order to protect consumers against further price increases. (VDKi/Si.)

On 15th January 2016, the VDKi (German Coal Importer Association) in Hamburg welcomed a high-profile guest to its New Year’s Reception. The President of the IG BCE (German Industrial Union for Mining, Chemicals and Energy), Michael Vassiliadis, delivered his keynote speech in front of an audience of around 170 members and guests.

He considers the latest fossil-fuel phase-out proposals from the initiative of the German think-tank Agora Energiewende to be entirely unconvincing. In his opinion Germany needs a comprehensive approach for its energy policies that incorporates social, economic and climate policy objectives. Instead, Agora Energiewende subordinates energy policy to a regulation strategy based solely on climate protection. The Agora ideas could not stand up to the demands of reality, commented the IG BCE President.

In spite of – and indeed because of – the energy transition, coal is an indispensable, competitive energy source that is reliably available and can compensate for fluctuations in the supply of renewable energy sources, while also remaining an important raw material, particularly for the steel industry.

The VDKi President, Dr. Wolfgang Cieslik, pointed out that record kilowatt-hour power generation from renewable energy sources alone does not represent success. Rather, power has to be supplied to consumers and made affordable, neither of which can be guaranteed by renewable energies. Expansion of the grid, he continued, cannot keep up with the unchecked development of green energy, and the annual subsidies total almost 25 bn €. Furthermore, grid operators incur enormous follow-up costs which will ultimately be borne by electricity consumers. Cieslik went on: “Even in the wake of the Paris Climate Change Conference, it is clear that coal-fired power plants are the only means for generating a reliable and affordable power supply.” (VDKi/Si.)

As the German Coal Importer Association (VDKi) in Hamburg suggested last summer, the steady growth reported in the production of coal (coking and steam coal) for more than a decade is now expected not just to have stagnated but to have declined for the very first time. The VDKi estimates that global production has decreased by approximately 150 to 200 mt to 7 bn t and seaborne coal trade has also fallen by 50 mt to 1.12 bn t. The particulars of the VDKi assessment are as follows:

• Production has dropped by 110 mt in China and by 70 mt in the USA.
• Australia and India were able to maintain or substantially increase steam coal production.
• For a number of reasons, Indonesia was no longer able to increase its production of steam coal as in recent years, and instead cut down production of coal and lignite by 11 % to 408 mt.

Seaborne coal trade and any changes in it are primarily determined by China and India. China is mainly responsible for the decline, having reduced coal imports by more than 30 %, or 73 mt, to support its own coal mining industry. However, thanks to the 6 % import duty on steam coal being cut due to the trade agreement with China effective February 2016, the export situation could improve for Australia at least.

There have also been clear shifts amongst exporting countries:

• Compared with the previous year, Australia and South Africa were able to maintain their export levels in 2015, exporting 386 mt and 76 mt respectively. Russia was able to increase exports by 7 mt, or 5 %, to 150 mt, and Colombia increased exports by 2.5 mt up to 79 mt. This was aided by the depreciation of the Russian rouble and the Colombian peso.
• By contrast, provisional figures provided by the VDKi show that Indonesia reduced exports by 32 mt, down to 325 mt, and that the USA likewise reduced exports by 20 %, or 17 mt, down to approximately 65 mt.

Apart from a brief interruption, the price of coal on the global market is now in its fifth year of decline. It reached its highest point in 2015 in February, at slightly more than 63 US$/t cif ARA for steam coal, and temporarily dropped to its lowest point in December at just under 50 US$. In mid-December 2014, steam coal still cost approximately 30 % more than it does today, at 72 US$/t. The price of shipments in February and March 2016 is already below 50 US$.

The EU has predominantly recorded a decline in coal imports compared with 2014. Imports to the United Kingdom in particular have fallen sharply (37 %). In 2015, Italy and Germany imported roughly the same overall amount of coal as the previous year. Spain increased its imports by 2 mt to 18 mt. An increase in the amount of power generated using renewable energies in the EU countries, combined with altogether unsustainable economic growth, is expected to limit steam coal imports in 2016.

The fact that the clean dark spread (costs for coal, freight and CO₂ certificates) remained cheaper than the clean spark spread (costs for gas, transportation and CO₂ certificates) in 2015 was deemed positive by the VDKi, despite considerable pressure on gas volumes and prices. This bolstered the position of coal-fired power generation behind the leading sources of renewable energy in the “race to cover the load” and further suppressed gas-fired power generation in Europe. Power was frequently exported to countries that rely heavily on gas-fired power generation, such as the United Kingdom or the Netherlands. Moreover, as a result of the wet summer in 2015, power was exported to countries with insufficient power plant capacity on the grid, such as France and Austria.

Although the use of coal in Germany fell only by a total of 0.7 % to 57.7 mt SKE in 2015, the use of coal in the steel industry remained unchanged at 17.8 mt. The use of coal to generate power fell by a moderate 0.8 % to 38.0 mt SKE and by a minimal 0.1 mt SKE to generate heat. Roughly two thirds of the total amount of coal consumed in Germany is used to generate electricity.

In view of the “climate-related political mood”, the amount of coal imported by Germany in 2015 was significant: According to provisional calculations by the VDKi, it has fallen by just 4 % to roughly 54 mt. 89 % of the overall consumption of coal in Germany, which stands at 57.7 mt SKE (provisional figure), was covered by imports, and 11 % was covered by domestic coal. (VDKi/Si.)