Merkel Embraces Coal as Rookie Lawmaker Makes Mark on Policy

Photographer: Michele Tantussi/Bloomberg

Lignite is dumped onto a conveyor belt at Vattenfall AB's Jaenschwalde open coal mine in Cottbus, Germany. Close

Lignite is dumped onto a conveyor belt at Vattenfall AB's Jaenschwalde open coal mine... Read More

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Photographer: Michele Tantussi/Bloomberg

Lignite is dumped onto a conveyor belt at Vattenfall AB's Jaenschwalde open coal mine in Cottbus, Germany.

For a first-time lawmaker, coal promoter Ulrich Freese made the most of Chancellor Angela Merkel’s pledge to counter rising power prices.

Freese, a Social Democrat former mining-union executive, won a parliamentary seat on Sept. 22, even as Merkel’s bloc defeated his party in national elections. As the two sides negotiated a coalition government, he inserted a commitment to use lignite, one of the most polluting forms of coal, to bridge the gap in Germany’s energy mix and rein in the second-highest electricity prices in the European Union after Denmark’s.

“This isn’t just about the environment, this is about the money” Germans pay for electricity, Freese, 62, said in an interview on Dec. 2. “We’ve got the most modern coal plants in the world. Brown coal lets us produce comparatively cheap and climate-friendly electricity.” His contribution, he says, was to add “precision” to the coalition’s coal policy.

With Merkel about to be installed for a third term, the rush for influence is under way in Berlin. Her struggle to pull off the biggest shift to clean energy of any developed country is one of the core battlegrounds, allowing a newcomer like Freese to exploit her decision to phase out nuclear plants and navigate the policy contradictions that transcend party lines.

To get there, Freese, who sits on the supervisory board of the German unit of Swedish state-owned utility Vattenfall AB, allied with two Social Democrat state leaders and overcame renewable-energy activists in his party during five weeks of bargaining over the agenda for Germany’s next government.

Lobbying Focus

Just as Merkel became the euro region’s pivotal leader during the debt crisis, her chancellery is set to be the focus of lobbyists as her coalition pledges 23 billion euros ($28.4 billion) in extra spending on infrastructure and other projects in Europe’s biggest economy.

That doesn’t even include the energy plan that Merkel ranks at the top of her third-term priority list. Her predicament is to square the nuclear exit with her campaign promise to reduce aid for renewable energy that has helped drive up power prices for consumers and industry.

While Merkel had to make deals with the SPD to form a government, the coal concession risks undermining her goal of boosting renewable-power use to as much as 45 percent by 2025 and 60 percent by 2035 from about 23 percent now. The two sides also agreed to scale back subsidies for offshore wind power.

Fukushima Meltdown

Merkel abruptly withdrew her Christian Democratic Union’s support for nuclear power after the March 2011 earthquake and tsunami in Japan caused the Fukushima reactor meltdowns. The power bill for the average German home has increased 14 percent since 2011, driven partly by a fee to finance the country’s renewable energy expansion that rose 49 percent since then.

More than 2 1/2 years later, the coalition pact is “the negation of the energy shift,” Sylvia Kotting-Uhl, the opposition Green party’s nuclear-energy spokeswoman, said in an interview. “They simply want to keep burning low-cost coal.”

Merkel knows some of the players in the race to meet the future energy needs of Europe’s biggest economy. Hildegard Mueller, a top official in her chancellery between 2005 and 2008, is chief lobbyist for the Berlin-based German Association of Energy and Water Industries.

One of the SPD coalition negotiators was North Rhine-Westphalia premier Hannelore Kraft, a possible Merkel challenger whose old coal-and-steel region in western Germany’s industrial heartland is home to the country’s two biggest utilities, EON AG (EOAN) and RWE AG. (RWE)

Who’s That?

Freese wasn’t on the chancellery’s radar before showing up at SPD deliberations on energy on Nov. 6, according to a Merkel aide who spoke on condition of anonymity because the coalition talks were private. Even some SPD members didn’t know who he was, according to a participant in the meeting.

His ticket was Dietmar Woidke, the Social Democratic premier of Brandenburg. The state includes part of former East Germany’s coal region and Freese was a freshly-elected lawmaker after SPD officials put him near the top of the party’s slate in the state. Woidke, in office for only 10 weeks, brought him on as an unpaid adviser, Freese says.

The result, he said, was language in the coalition pact presented by Merkel on Nov. 27 that says it’s “indispensable” for Germany to run conventional power plants using lignite, also known as brown coal, hard coal or gas for the “foreseeable” future.

Strip Mining

That meshes with Vattenfall’s plan to extend strip mining in eastern Germany’s Lusatia region, some 150 kilometers (94 miles) southeast of Berlin, where more than 80 villages have been demolished and residents resettled to extract lignite.

The coalition contract’s wording on coal shows that Merkel’s prospective government is giving “high priority” to secure, affordable energy and recognizes the need to increase “market integration” of renewable sources, Sandra Kuehberger, a Vattenfall spokeswoman in Germany, said by e-mail today.

On the 20-member supervisory board at the Swedish utility’s German unit, Freese holds a seat reserved for labor delegates for which he receives 37,500 euros ($51,600) a year, 80 percent of which he says he gives to the labor-affiliated Hans Boeckler Foundation, or to charity. That position connects him with the 35,000 jobs in Brandenburg and next-door Saxony that Vattenfall says depend on lignite.

RWE, Germany’s second-biggest utility, may also benefit. More than half of the Essen-based company’s power plant capacity, or 23 gigawatts, is coal-based, according to a company brochure. It generated 81 billion kilowatt-hours of electricity with its lignite plants in 2012, more than from renewable sources and natural gas combined.

“We welcome the clear commitment to fossil-fired power plants in the coalition contract,” Mueller, the head of the BDEW lobby that represents EON, Vattenfall, RWE and EnBW Energie Baden-Wuerttemberg AG (EBK), told reporters in Berlin yesterday. Gas and coal plants are “necessary to balance out the renewable energies and their fluctuating generation.”

Freese’s role suggests that pressures on Merkel go beyond paid lobbyists as she allies with the SPD for the second time since coming to power in 2005.

“I’m not doing this for the money,” Freese said. “I use my influence for the good of the workers.”

To contact the reporter on this story: Arne Delfs in Berlin at adelfs@bloomberg.net

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net; James Hertling at jhertling@bloomberg.net

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