Is Germany looking again at coal-powered electricity?

An important development from the financial markets: Is Germany looking again at coal-powered electricity? 3 hours ago Share Save Add as preferred on GoogleJohn LaurensonBusiness reporterAFP via Getty ImagesGermany currently gets 20% of its electricity from coal-powered stationsThey have a word for it in German – kohleausstieg, which means "coal phase out". Germany is the biggest user of coal for power generation in Europe, and the fourth largest in the world after China, India and the US.

But it has pledged to stop using it altogether by 2038. For lignite, the low-quality soft coal that is the most polluting, Germany has even brought the phase out forward to 2030. Currently some 20% of German power generation comes from coal, but it wishes to end this as it focuses on growing wind and solar.

Economic Details

In fact, Germany already gets more than half of its electricity from renewables, 59% last year. As back-up to wind and solar, especially for the winter months, it wants to replace coal with more natural gas power stations. These generally release half as much carbon dioxide as coal, and gas currently accounts for 13% of German electricity generation.

However, the recent jump in global gas prices following the US-Israel conflict with Iran, has encouraged a number of countries to reconsider coal as an energy source. Japan has loosened rules to allow for the increased use of coal-fired power plants, Italy is delaying the closure of its remaining stations until 2038, and India has postponed maintenance shutdowns. But what about Germany?

Back in March, Chancellor Friedrich Merz said: "We must supply this country with electricity. I am not prepared to jeopardise the core of our industry simply because we have adopted phase-out plans that have become unrealistic. "Was this the start of a phase-out of the phase-out?

Analyst Views

Is Germany going to keep coal power after all? The problem for the German government regarding what the country burns to make electricity is a two-fold one of supply and price. Germany has an abundance of readily available, cheap lignite.

It has the largest reserves in Europe and the third biggest globally. It is entirely self-sufficient in the fuel. By contrast, it has to import 95% of its natural gas supplies.

So when the global cost of gas shoots up, switching back to the much cheaper lignite is financially very appealing. And Germany doesn't have to worry about supply shortages. Meanwhile, nuclear is not an option, as Germany closed the last of its nuclear power stations in 2023.

Economists are analysing what the news means for the markets.