Dieter Helm Half Right About Something

In an extraordinary development, I have discovered a recent statement from Dieter Helm that is not completely wrong. It is at the end of this Bloomberg article about the well known facts that gas generation is more expensive than coal right now, and both are getting less operating hours with rising shares of renewable in the German electricity mix. Thanks to this tweet by Robert Wilson for the link.

Here is what Helm had to say, according to the Bloomberg article:

“Germany is currently switching from nuclear to coal, and from gas to coal — about the worst thing that could be done from a climate change perspective,” Dieter Helm, an energy policy professor at the University of Oxford, said by e-mail. “Its current energy policy is not going to reduce its real emissions.”

And the point he is right about is the fact that Germany, indeed, has decided to phase out nuclear. With no party in Parliament objecting and a overwhelming majority, one may add.

In contrast, I must have missed the part where the German Parliament, inspired by the desire to heat the planet up further, decided to build more coal power plants. I also was not aware of any policy decision to switch from gas to coal.

I may be wrong, but the policy decisions Helm asserts have happened really did not, as far as I know.

As far as gas is right now less profitable compared to coal (which was the main theme of the Bloomberg article), that’s a market development. The situation happens to be the reverse in the United States, where coal is losing ground on gas in electricity generation, but there is no policy decision of the Americans about this issue.

As far as policy has any influence at all on this particular market dynamic, it is the policy set at EU level on the Emission Trade System, which is not ambitious enough in its goals, leading to very low carbon prices right now. That could easily be changed by increasing the pace of reduction massively, as industry could well afford to do with these low prices. Clearly this is not something Germany can decide on alone.

And another policy influence is the fact that Europe has not embraced the idea of going after unconventional gas by “fracking”, as America has. I support that in principle. If most of the fossil fuel resources need to stay in the ground anyway, it makes sense to declare the whole unconventional reserves off limits to begin with, increasing prices of fossil fuel (a good thing from the climate point of view).

The main developments in German energy policy are, in that order:

A transition of the whole system (not only electricity) to renewable energy.

Getting rid of nuclear.

There is no plan to transition to coal. How the remaining share of fossil fuel power generation is distributed between coal, lignite, and gas is left to the market. Short term developments on this market (e.g. coal beating gas right now) are not relevant for the policy discussion.

In contrast to the short term market development right now, the long term assumption is that coal and lignite capacity will go down, while gas capacity will go up, with the sum of fossil fuel capacity largely unchanged.

 

Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003, lenzblog.com).

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