* German exports supporting lignite
* 6% CO2 reductions forecast for 2016
European power sector CO2 emissions fell by 0.5% or 5 million mt to 1.064 billion mt last year as fossil-fired generation offset record growth in renewables, climate campaign group Sandbag said in provisional analysis released Tuesday.
Large falls in coal generation in the UK were offset by increased coal generation in the Netherlands, Spain, Portugal and Poland, while European gas-fired generation saw its first increase since 2010, the environmental think tank said.
Meanwhile German lignite-fired power production was barely changed year on year, or indeed on 2010, as the country exported a record 50 TWh last year, Sandbag said.
Nevertheless the organization characterized 2015's modest decline in power sector CO2 emissions as a "pause for breath" after the dramatic 7.5% fall in 2014, and predicted another big dip in emissions this year.
"We expect emissions to resume a steep downward trajectory in 2016, down around 6% for the power sector," Sandbag carbon and power analyst Dave Jones told Platts.
"There is going to be another significant fall in coal generation, while 2.4 GW of Belgian nuclear capacity returned in December, further reducing the need for fossil generation," he said.
LOOMING COAL CLOSURES
The analysis points to 2.7 GW of coal plant closures in the Netherlands this and next year (three Dutch coal plants were closed last November); 5.8 GW of coal closures in the UK in March; and 4.3 GW of closures in other European markets as the EU's Large Combustion Plant Directive bites (although virtually none of this is in Germany).
Further pressure on coal plant is expected as nuclear plants in Sweden, Switzerland and the Czech Republic improve performance on last year, and the new interconnector between France and Spain reduces the need for Spanish coal generation in 2016, "as would a return-to-normal in Spanish hydro levels," Jones said.
The gray area was German climate policy, Jones said. "Germany committed to pay to put a small number of lignite units into a reserve for closure, but it is unclear how quickly the remaining old units will close," he said.
Lignite is cheap as long as CO2 prices are low, Jones said. When interconnectors expand, as planned across northwest Europe, lignite power can flow into other countries, notably the UK, Italy and the Netherlands, displacing lower-carbon gas-fired generation.
"This is especially true of Germany, where new interconnection will keep increasing German exports even further than now," Jones said.
"Only 9% of the fall in conventional generation emissions since 2010 can be attributed to hard coal generation," he said. "Worse, the dirtiest fuel, lignite, is unchanged over a five-year view. Instead, most of the fall has been from gas generation: in fact gas generation from 2010 to 2015 fell by the same amount (-282 TWh) as renewables increased (+283 TWh). This is because the marginal cost of gas is more currently expensive than coal, when using a low carbon price," he said.
2020 EU ETS FORECAST
For the EU Emissions Trading System as a whole (i.e. all the factories, power plants and other industrial installations that must participate in the system), Sandbag's CO2 emissions forecast to 2020 remains unchanged, with emissions to fall 21% from 2014 to 2020. This would equate to 30% economy-wide CO2 cuts by 2020, far surpassing the EU target of a 20% cut by 2020.
The analysis forecasts that total EU ETS stationary emissions for 2015 fell by 0.7% to 1.802 billion mt from 1.814 billion mt in 2014, with industrial emissions forecast to have fallen by around 1% to 738 million mt.
