High and dry

Drought threatens Germany's plan to burn more coal

Climate change and energy geopolitics are set to collide in Europe this summer as an energy drought “doom loop” threatens to leave the continent high and dry.

Over the past few months I’ve highlighted how severe drought across much of Europe has led to a sharp decline in reservoir levels, in turn resulting in a fall in hydroelectric generation (see The forgotten giant of clean energy: Why carbon market investors need to keep an eye on Europe's drought).

Less power generation from Europe’s hydroelectric dams increases the call on natural gas, thermal coal and other forms of power generation to make up the difference. In addition, hot weather also increases power demand from households and businesses running air-conditioning units.

Recall that in mid-June the German government announced that it would reopen mothballed thermal coal power plants in a bid to curb natural gas demand and help build up inventories ahead of winter. A number of other European governments followed suit. Austria announced that it would convert a gas fired power plant, currently kept on stand-by so that it can burn thermal coal. Last but not least, the Netherlands removed a limit on coal fired generation in a bid to conserve natural gas stocks for the winter (Back to black?: There's more to Germany's energy security plan than burning more coal).

As yet Europe has not fired up it’s coal generation to the extent that the media portrays. German thermal coal generation fell to 5,345 MW during w/e 10th July, similar to levels seen in July 2021 (Chart 1). Other European countries with coal generation assets are showing similar thermal coal generation trends.

Chart 1: German thermal coal power generation

Despite their best laid plans to burn more coal this winter, the strategy could well be scuppered by the same drought that has been affecting the continent’s hydroelectric dams.