This year’s rally in carbon prices has already made it both cheaper and greener for Germany to bring forward its coal exit by eight years, Finnish technology group Wartsila said on Tuesday.
According to Wartsila modelling, carbon prices of around EUR 50/t made it 5-10% cheaper for Germany to retire all coal plants by 2030 and to replace them with a combination of much more renewable energy and some additional combined heat and power (CHP) gas units.
“We are moving towards a system with wind and solar as baseload, supported by flexibility,” said Wartsila market development manager Jan Andersson. “That is the cheapest form of electricity production now and has been for a while.”
Carbon prices have roughly doubled since November and analysts expect them to continue to rise this decade to meet stiffer EU climate goals. This has further supported business cases for clean energy whose production costs have tumbled in recent years.
Wartsila estimated Germany would only need to raise its renewable energy expansion plans by roughly 50% to around 13 GW of new solar and wind per year out to 2045 to make up for a faster coal exit. It would also need another 12 GW of gas-fired combined heat and power plants.