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Germany’s Green Obsession Is Boosting Putin’s Russia

Stefan Nicola, Tino Andresen and Brian Parkin, Bloomberg

Germany is turning against coal as a fuel for generating electricity, a move that will boost the nation’s reliance on natural gas from Russia.

Alarmed that curtailing nuclear power has prompted utilities to burn the most coal in six years, Chancellor Angela Merkel’s government is working on a plan to reinforce Germany’s commitment to reduce fossil fuel emissions. The Economy Ministry on Oct. 31 published a paper laying the groundwork for the most strict steps yet to limit coal in Europe.

The shift, if implemented, would force Germany to tap Russia for additional supplies, to import power from neighbors and to further subsidize renewables such as solar and wind. That would swell the country’s 100 billion-euro ($126 billion) annual fuel import bill and may boost the cost of electricity paid by consumers, already the second-highest in the European Union.

It would also run counter to efforts by the U.S. and EU to isolate Russia economically.

“The importance of gas, and with that the dependence on Russia, will increase,” said Guido Hoymann, an analyst at B. Metzler Seel Sohn & Co. KGaA. Cross-border exchanges of electricity also would rise, helping the nuclear plants just outside Germany’s border, he said.

Gazprom Benefits

Scaling back coal would help OAO Gazprom (OGZD), the state-controlled Russian producer that accounts for about a third of Germany’s gas imports. It would hurt utilities such as RWE AG and Vattenfall AB that operate coal-fired plants. […]

Recasting Germany’s fuel mix requires Merkel to balance the goal of reducing carbon dioxide emissions, which rose 1.5 percent last year, against the need to limit electricity bills. German household consumers on average paid the equivalent of $0.41 per kilowatt-hour in the second quarter, almost twice the price in Japan and more than three times the cost in the U.S., according to International Energy Agency data.

Costly Decision

Exiting coal could become “very expensive,” because gas, the obvious replacement, costs more, said Hoymann, the analyst at Metzler Seel Sohn. “Power production from lignite will be increasingly difficult,” he said. “These plants emit a lot of CO2, and we’re doing the contrary to what our targets say.”

The government’s official remarks about its plans indicate the difficulty of getting that balance right. It “is not possible in a strongly industrialized country such as Germany” to scrap both nuclear and coal power at once, the Economy Ministry said in an e-mailed response to questions. “It’s clear, however, that also conventional power plants will have to adopt to the requirements of the Energiewende.”

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