Germany to Reopen Coal-Fired Plants if Russia Cuts Off Natural-Gas Shipments

Europe purchases two different kinds of coal from Russia: metallurgical coal, which is used in the manufacture of steel, and thermal coal, which is used in power plants to generate power. Robert Habeck, Germany’s economic minister, revealed recently that the country was planning to bring back oil- and coal-fired power plants if Russia cut off shipments of natural gas to Europe.

The minister will be presenting a proposed law this week that will allow the country’s government to bring back these facilities to be used in the event of a gas shortage. Germany has 1.5GW of oil facilities and 4.2GW of coal plants on reserve. Most of these facilities were scheduled for shut down as part of the country’s phase-out plan. Even with the reserves, however, safeguarding the supply of energy in the country will not be an easy feat because Europe relies on Russia for most of the thermal coal it uses to run its power plants.

If a gas shortage occurs, the country plans to turn to fossil fuels even if it means increasing carbon emissions, so as to keep its industrial parks running and ensure that its citizens have electricity. According to the emergency decree, the request for power generation using coal will occur only if there’s a shortage of gas or if there’s a threat of a gas shortage and the consumption of gas in the generation of power needs to be decreased.

The decree also stated that phasing out coal in Germany needed to be completed by 2030, adding that this was even more important than the current crisis. It then noted that on the journey to phase out coal, the country needed to strengthen its precautions and keep power plants fired using coal in the reserves for a lengthier period in the short term.

German utilities have stated that they could build more plants if necessary, with RWE AG revealing that it was assessing which coal-fired power plants could be used to generate power again. Additionally, energy firm Uniper also revealed that it could dispatch about 3GW of power generated from coal to help strengthen supply security.

Russia makes up about 70% of thermal coal imports in the European Union, with Poland and Germany being two of the countries that rely the most on this fuel. Given that most of the fuel needed in Europe comes from Russia, utilities in the European Union will have to part with more to acquire coal from countries such Australia and South Africa. As more coal is sourced from further away, companies such as Warrior Met Coal (NYSE: HCC) will most likely see an uptick in the orders received from countries that had never done business with them in the past.

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