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Electricity prices could rise by 20 percent due to coal withdrawal

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Electricity prices could rise by 20 percent due to coal withdrawal
LEAG power station in Brandenburg. Photo: DPA
08:39 CET+01:00
The phasing out of coal-based power generation in Germany could push up electricity costs by 20 percent, according to experts.

That's the findings from the RWI Institute who say Germany's exit from coal is going to be expensive for consumers and taxpayers, the Rheinishe Post reported Tuesday.

Germans are already paying the highest prices for electricity in Europe, the newspaper reported. It came as around 9,000 employees of energy giant RWE Power wait for details on job cuts.

SEE ALSO: Germany should phase out coal mining by 2038: Commission

"According to various studies on this topic, the phasing out of coal could raise the price of electricity on the stock exchange by around 20 percent or one cent per kilowatt hour," Manuel Frondel, energy expert at the RWI Leibniz Institute for Economic Research in Essen, told the Rheinishe Post.

For a three-person household with an annual consumption of typically 4000 kilowatt hours, this would mean €40 in additional costs per year.

"Electricity will be more expensive anyway, because the expansion of renewables will be financed by the EEG (Renewable Energy Sources Act) levy and grid fees will rise," said Thilo Schaefer of the Institute of German Business.

Schaefer also said that in the medium term, getting rid of plants that use lignite or brown coal will eliminate a cheap way of generating electricity.

As The Local has reported, the Coal Commission has recommended phasing out coal by 2038 and shutting down around 12.5 of the 43 gigawatts of coal-fired power plant capacity by 2022.

SEE ALSO: Energy giant warns of significant job losses over Germany's coal phase out

The commission's findings will now be passed on to the government, which is expected - barring a surprise - to follow the recommendations of the panel it set up.
 
Under the plan, several plants that use lignite or brown coal, which is more polluting than black coal, will be closed by 2022. Other plants will follow until 2030, when only 17 gigawatts of Germany's electricity will be supplied by coal, compared to today's 45 gigawatts. 
 
The last plant will close in 2038 at the latest, the commission said, but did not rule out moving this date forward to 2035 if conditions permit.
 
The affected regions, where tens of thousands of jobs directly or indirectly linked to brown-and black-coal energy production, will receive €40 billion as compensation over the next two decades.

Although more and more wind turbines and solar plants are being installed, they often do not supply enough electricity because they depend on weather conditions.

Can electricity consumers be relieved?

The Commission advises the federal government to relieve consumers of two billion euros in network charges. But it is still unclear how this will be done and whether the EU will participate. According to RWI expert Frondel, electricity tax could be reduced by around a third with two billion euros, i.e. from two cents per kilowatt hour to around 1.3 cents. "But it is still unclear how electricity consumers will be relieved," Frondel said.

However, this would not assist the industry, experts say. "If the €2 billion were used to reduce the electricity tax, for example, the industry would not be helped because of its exemption from the electricity tax," said Frondel.

The CDU Economic Council is also concerned. They say the electricity supply must remain secure and affordable and that the expansion of the grid must be accelerated. Only one eighth of the 7700-kilometre electricity grid expansion in Germany has been completed. Meanwhile, German consumers already currently pay the highest prices for electricity in Europe.

"The government will do everything it can to protect consumers from rising electricity prices by switching from coal to renewable energy," said Federal Minister for Economic Affairs and Energy Peter Altmaier, of the centre-right Christian Democrats (CDU).

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