Forest Failure

RWE's brown coal strategy torpedoed by German court

Unbenannt
Changing course. Source: Reuters/Wolfgang Rattay

Friday was not a good day for RWE. In a major defeat for the giant power company, a German court ruled it must suspend its operations to clear the remaining 100 hectares (247 acres) of old-growth forest near Cologne. RWE shares plunged 8.5 percent on the news.

For months RWE was locked in a bitter struggle with protestors over the future of Hambach Forest, which the company said must be cut down to expand open-cast brown coal mining in the area. Although the firm said it is committed to renewable energy in the long term, coal-fired generation still represents a major part of its operations.

Time to reconsider

The court ruled it needed more time to consider larger issues at stake and that RWE could not create an irreversible situation as the court deliberates. Citing the decision’s “wide-ranging consequences,” the company said the clearing operations would be postponed until late 2020, possibly longer.

Some 50,000 demonstrators attending an anti-coal protest near the forest wound up celebrating the ruling on Saturday. The decision not only stopped the immediate destruction of the forest, but cast further doubt on RWE’s brown coal operations in the region. Environmentalists called on the federal government’s coal commission to accelerate the country’s move away from coal-generated power.

Unsurprisingly, opinions on whether the company should return to planned operations in two or more years’ time are divided. Andreas Löschel, professor of resource economics at the nearby Münster University, said RWE’s plan remains realistic and economically viable. Environmentalists, on the other hand, see this as a great victory over the energy company and a situation from which it can draw lessons.

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Partly because of bats

As well as announcing the delay in operations, RWE warned that the court decision would trigger economic losses “in the low three-digit million euros,” starting in 2019. The company said it was “greatly surprised” by the decision, which resulted partly from the presence of an endangered species – the rare, tree-dwelling Bechstein’s bat.

Supported by regional politicians, RWE’s leadership took a firm line on the forest in recent months. Speaking to Handelsblatt, CEO Rolf Martin Schmitz called protesters “criminals” and said forest clearance was essential for RWE brown coal operations.

On Friday, RWE said the ban on using heavy machinery in and around the forest would have a “domino effect,” interfering with mining and stopping operations in associated power plants. The company mines an estimated 40 million tons of brown coal from this field annually.

Furthermore, mining and power generation operations provide a total of 4,600 jobs in the area, RWE said. And brown coal production accounts for 15 percent of electricity in North Rhine-Westphalia, Germany’s largest state.

The role of coal

Attention will now shift from Hambach Forest to broader questions of coal-powered electricity generation. Environmentalists said they would ramp up pressure on the government to end the use of coal sooner than the planned 2030 exit date.

Germany’s coal commission, which includes representatives from industry, trade unions and environmental groups, is due to publish their preliminary plans for the coal exit prior to the next World Climate Summit in December. The future of Hambach Forest caused considerable tension within the body, with talk of environmentalist walkouts. Now, this seems unlikely.

However, experts said decisions on the future of coal are highly complex. All power generation is now covered by Europe-wide emissions trading. “Emissions reduction in this sector is now effective and efficient. Those proposing a quick exit from coal have to address the economic and geopolitical consequences,” explained Marc-Oliver Bettzüge, director of energy economic research at Cologne University.

Activists claim that companies like RWE want continued coal use because it is profitable, not because it is necessary. In a report published Friday, Germany’s Green Party claimed RWE only used one-third of the brown coal it mines for local power generation, exporting the remainder to countries like Belgium.

Now, RWE senior management must now face up to a very public defeat on an issue they claimed was crucial for future corporate operations. But environmentalists are taking nothing for granted: Over the weekend, protest treehouses that were destroyed by police were already being rebuilt in the forest.

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Jürgen Flauger covers the energy market for Handelsblatt, including electricity and gas providers, international market developments and energy policy. Klaus Stratmann covers energy policy and politics for Handelsblatt. Brian Hanrahan adapted this story into English for Handelsblatt Global. To contact the authors: flauger@handelsblatt.com, stratmann@handelsblatt.com

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