Identifying influencing factors for increased coal consumption in Germany despite political directives of the Energy Transition

Troutman,
Homework
#3
1

REAP
Module
“Research
Methods
and
Statistics”

Winter
Term
2014/2015

Homework
#3:
Final
Homework

Multi-‐Variable
Linear
Regression
Analysis

Utilizing
R-‐Software

“Assessing
the
impact
of
U.S.
natural
gas
production
and
the
phasing-‐out
of
nuclear
energy
in

Germany
on
the
consumption
of
hard
coal
in
primary
energy
consumption
in
Germany
from

1990
to
2013”

Submitted:
Sunday,
April
12th,
2015

Heather
Troutman

6028601

Troutman,
Homework
#3
2

Table
of
Contents

1
-‐
Introduction.......................................................................................................................................................03

2
–
Data......................................................................................................................................................................04

2.1
–
Discrepancies...........................................................................................................................................04

2.2
–
Ambiguity..................................................................................................................................................04

2.2.1
-‐
Hard
coal
or
total
coal.................................................................................................................04

2.2.2
-‐
Percentage
or
quantity...............................................................................................................04

2.2.3
–
PEC
or
GEG......................................................................................................................................05

2.2.4
–
1990,
2007
or
2010.....................................................................................................................05

2.3
–
Reasoning
for
selected
data................................................................................................................05

3
–
Results.................................................................................................................................................................06

3.1
–
Nuclear
on
hard
coal.............................................................................................................................06

3.2
–
U.S.
natural
gas
on
hard
coal...............................................................................................................06

3.3
–
Nuclear
and
U.S.
natural
gas
on
hard
coal......................................................................................07

4
–
Conclusion..........................................................................................................................................................09

5
–
References..........................................................................................................................................................09

Appendix
1
–
Single
Variable
Linear
Regression
Results.........................................................................10

Appendix
2
–
Data
Discrepancies......................................................................................................................14

Appendix
3
–
Preliminary
Results....................................................................................................................14

Figures,
Graphs
and
Tables

Figure
1
U.S.
NG
production
and
price
(2010-‐2013)..................................................................................04

Table
1
Data
Discrepancies.................................................................................................................................04

Figure
2
Influence
of
nuclear
on
coal
as
a
percentage
of
PEC
(2010-‐2013).......................................06

Figure
3
Influence
of
U.S
natural
gas
production
(billion
M3)
on
coal
as
a
percentage
of
PEC

(2007
to
2010
and
2010-‐2013)........................................................................................................07

Figure
4
Influence
of
U.S
natural
gas
production
(billion
M3)
and
percentage
of
nuclear
on

German
PEC
on
coal
as
percentage
of
PEC
(2010-‐2013),

(2010-‐2013
U.S.
NG
inverted),
(2009-‐2013
U.S.
NG
inverted)................................................08

Troutman,
Homework
#3
3

1
–
Introduction

Germany
is
currently
in
the
international
hot-‐seat
on
energy
transitions.

The
global
community

officially
began
to
discuss
the
need
for
a
move
away
from
carbon-‐intensive
energy
sources
in
1992
with
the

adoption
of
the
Koto
Protocol
by
90
of
196
countries
(the
author
is
including
Taiwan
and
Palestine),
or
nearly

46%
of
the
politically
recognized
world.

Germany
surpassed
all
precedence
in
2000
with
the
adoption
of
a

Climate
Action
Plan,
which
has
become
known
as
the
Eneriewende,
that
will
not
only
reduce
carbon-‐intensive

energy
consumption
and
increase
non-‐carbon,
renewable
energy
sources,
but
also
phase-‐out
nuclear
energy

generation.1

Ideally,
increases
in
renewable
energy
would
displace,
both
the
reductions
in
nuclear
energy
and
other

carbon-‐intensive
energy
sources,
mainly
coal.

Critics
(Deutsch
Bank
Research,
2014)
site
increasing
carbon

dioxide
emissions
in
2012
and
again
in
2013
as
a
result
of
increased
coal
consumption
displacing
nuclear

energy.

Other
studies
(Heinrich
Böll
Stiftung,
2014)
argue
that
increases
in
coal
consumption
reflect
the

decision
to
build
five
new
coal
plants
in
2005
that
have
now
just
come
on-‐line
reflecting
energy
prices
in
2005

and
not
current
circumstances.

Germany
was
the
country
with
the
highest
lignite
production
in
2012,
and
the
seventh
largest
producer

of
hard
coal
(Euracoal,
2013).

Still,
it
should
be
acknowledge
that
Germany
makes
up
a
relatively2
small

percentage
(3%)
of
global
coal
demand,
far
behind
China
(48%)
the
U.S.
(11%)
and
China
(10%)
(IEA,
2013).

Lignite
has
a
lower
energy
content
than
hard
coal
and
higher
moisture
content,
rendering
it
uneconomical
for

export
but
economically
viable
for
domestic
use.

It
seems
plausible
that
this
situation
could
lead
to
increasing

consumption
of
lignite
to
offset
nuclear,
despite
its
swollen
carbon
footprint
and
Germany’s
low-‐carbon

ambitions.

The
Deutsch
Bank
Research
Group
(2014)
has
posited
that
the
German
coal
market
has
had
little

influence
on
coal
consumption.

Rather,
the
U.S.
natural
gas
boom
is
the
reason.

“Above
all,
the
US

breakthrough
of
gaining
access
to
cheap,
unconventional
(shale)
gas
also
impinged
on
Europe
and
even

Germany
with
its
particularly
idiosyncratic
energy
policy.
The
latter
occurred
indirectly,
since
the
US
market

saw
cheap
unconventional
gas
displace
hard
coal,
which
in
turn
found
its
way
to
Germany
by
ship
“at
a
cut

price”
–
and
thus
influenced
(and
continues
to
influence)
Germany’s
energy
mix.
In
a
short
space
of
time
the
US

became
one
of
Germany’s
most
important
suppliers
of
coal.”

If
the
matter
wasn’t
yet
sufficiently
convoluted,
it
has
also
been
argued
that
there
hasn’t
actually
been

an
increase
in
coal
consumption
(Heinrich
Böll
Stiftung,
2014).

This
confusion
begs
investigation.

Has
the

2000
decision
to
phase-‐out
nuclear
energy
in
Germany
lead
to
an
increase
in
coal
consumption?

Was
this
effect

enhanced
following
the
2007
U.S.
natural
gas
boom
leading
to
increased
hard
coal
exports
and
decreased

international
hard
coal
prices?

Or,
has
German
coal
consumption
actually
decreased
rather
than
increased?

1The
author
would
like
to
note
that
Germany
imports
electricity
from
neighboring
countries
and
has
not

currently
adopted
policies
to
quantify
or
limit
if
that
electricity
was
produced
from
nuclear
reaction.

It
is

foreseeable
that
increasing
international
electricity
trade
as
directed
by
the
EC
(2014)
could
result
in
an

increase
in
nuclear-‐generated
electricity,
namely
from
France.

2
Germany’s
coal
demand
is
small
relative
to
GDP,
but
not
in
comparison
to
population
size.

Troutman,
Homework
#3
4

2
–
Data

2.1
–
Discrepancies

There
exists
a
surprising
inconsistency
in
data
on
U.S.
natural
gas
production
as
presented
by
the
U.S.

Energy
Information
Agency
(USEIA)
(2014),
the
German
Federal
Ministry
for
Economic
Affairs
and
Energy

(Bundesministerium
fur
Wirtschaft
und
Energie
–
BMWi)(2014),
and
British
Petroleum
(BP)(2014),
as

expressed
in
Table
1.

Similar
discrepancies
were
found
with
German
coal
consumption.

These
inconsistencies

likely
arise
from
the
adoption
of
different
energy
efficiency
conversion
factors
by
the
various
reporting

agencies.

It
is
worth
noting
that
the
German
Working
Group
on
Energy
Balances
(AGEB)
made
considerable

changes
in
the
valuation
of
energy
efficiency
from
various
sources
in
1995
away
from
conventional
conversion

rates
adopted
by
the
EIA
and
World
Bank
to
“more
accurately
reflect
German
and
European
operational

performance
(BMWi,
2014).
2.2
–
Ambiguity

2.2.1
-‐
Hard
coal
or
total
coal

Which
to
consider,
total
coal
consumption
or
hard
coal
consumption?

First,
the
U.S.
is
exporting
hard

coal
(USEIA,
2014).

Second,
Germany
still
has
an
economically
viable
supply
of
lignite
reserves
that
out

perform
hard
coal
and
often
natural
gas,
also
increasing
coal
demand.

Resultantly,
there
has
been
a
sharper

rise
in
both
the
quantity
and
percentage
of
lignite
consumption
in
Germany
in
the
past
decade.

2.2.2
-‐
Percentage
or
quantity

Total
primary
energy
consumption
(PEC)
has
been
in
decline
since
2005
but
so
too
has
the
distribution

of
energy
sources
changed
quite
drastically
in
Germany
since
the
early
‘90s.

The
decrease
in
PEC
is
partially

due
to
increased
efforts
in
energy
efficiency,
but
also
reflects
the
economic
crisis
of
2008
and
a
slow
recovery
in

German
industry.

The
changing
energy
mix
is
a
result
of
the
Energiewende
and
the
rapid
deployment
of

renewable
energy
sources.

Figure
1
U.S.
NG
production
and
price

(2010-‐2013).
Source:
Deutsch
Bank
Research

(2014)

Table
1
Data
discrepancies.
Source:
Author

Troutman,
Homework
#3
5

2.2.3
-‐
Primary
energy
consumption
or
gross
electricity
generation

Changes
in
quantity
and
distribution
of
energy
sources
has
manifested
differently
between
primary

energy
consumption
(PEC)
and
gross
electricity
generation
(GEG).

It
is
not
immediately
clear
which
category

most
appropriately
represent
the
phenomenon
this
study
seeks
to
address,
refer
to
Annex
1.

Calculations
by

the
author
have
verified
that
percentage
of
both
hard
coal
and
nuclear,
in
terms
of
power
content
in
TWh,
have

maintained
a
consistent
proportion
between
PEC
and
GEG.

Consistently,
since
1990,
33%
of
all
nuclear
energy

has
been
used
in
GEG.

Hard
coal
has
ranged
from
22%
to
27%
from
1990
to
2013,
with
a
closer
range
of
24%

to
26%
since
2009
–
our
area
of
observation,
see
Annex
2.

Further,
it
should
be
acknowledge
that
the
rapid

increase
in
renewable
energy
generation
has
only
affected
GEG.

2.2.4
–
1990,
2007
or
2010

In
1990
Germany
committed
to
phasing-‐out
nuclear
energy
by
2022.

Thus,
it
can
be
expected
that
if

this
decision
lead
to
an
increase
in
coal
consumption
that
this
would
become
evident
in
the
years
directly

following
the
first
nuclear
plant
closures.

If
increased
U.S.
natural
gas
has
influenced
German
coal
consumption

then
one
can
expect
to
see
this
effect
following
the
U.S.
natural
gas
boom
in
2007.

Additionally,
the
economic

crisis
of
2008
resulted
in
a
sharp
decrease
in
PEC
and
a
temporary
increase
in
nuclear
energy
consumption,
but

a
decrease
in
both
total
coal
and
hard
coal
consumption.

However,
visual
analysis
of
coal
consumption
in
PEC

and
GEG
both
as
a
quantity
and
as
a
percentage
show
a
transition
from
declining
coal
consumption
relative
to

the
year
before
to
an
increase
from
2010
to
2013,
refer
to
Annex
1.

Is
this
a
result
of
the
compounded
effect
of

decrease
in
nuclear
energy
production
in
Germany
and
an
increase
in
U.S.
natural
gas
production?

2.3
–
Reasoning
for
selected
data

Ultimately,
it
was
decided
to
examine
hard
coal
as
opposed
to
total
coal
consumption
in
Germany

because
the
U.S.
is
exporting
hard
coal,
and
not
lignite
(USEIA,
2013).

Percentage
has
been
examined
instead
of

quantity
because
of
the
rapid
drop
in
PEC
following
the
2008
economic
crisis.

While
it
is
reasonable
to

consider
the
economic
effects
this
had
on
viable
energy
sources,
such
an
analysis
is
beyond
the
scope
of
this

study.

The
author
believes
that
changes
due
to
increased
U.S.
natural
gas
exploration
and
German
nuclear

decommissioning
is
best
represented
by
the
percentage
of
PEC
and
not
total
quantity.

PEC
has
been
reviewed

rather
than
GEG
because
there
has
been
no
change
in
distribution
of
total
energy
supply
for
nuclear
between

the
two
categories
since
1990,
and
a
reasonably
small
variance
in
hard
coal.

As
PEC
represents
77%
of
total

nuclear
energy
by
power
content
and
74%
to
76%
of
hard
coal
(in
the
defined
timeframe),
PEC
should
best

reflect
changes
in
distribution
of
PEC
energy
sources
following
the
rule
of
magnitude.

Examination
of
trends

from
1990
to
2013
shows
clear
and
strong
downward
trends
in
both
nuclear
and
hard
coal
energy
production.

Relative
to
the
year
before,
hard
coal
first
begins
an
upward
trend
in
2010.

This
timeframe,
however,
was
too

transient
for
the
R
software
and
insufficient
for
computation,
so
the
timeframe
has
been
modified
to
2009
to

2013.

This
decision
is
further
described
in
the
following
section.

Troutman,
Homework
#3
6

3
–
Results

3.1
–
Nuclear
on
hard
coal

0.080 0.085 0.090 0.095 0.100 0.105
0.1220.1240.1260.128
Influence of nuclear on coal as percentage of PEC (2010-2013)
Nuclear
Coal

In
the
observed
time
frame
there
is
a
strong
and
very
significant
negative
linear
correlation
between

the
percentage
of
nuclear
energy
in
PEC
and
hard
coal,
i.e.
the
more
the
portion
of
nuclear
energy
decreases
in

PEC
the
more
the
portion
of
hard
coal
increases.

The
R-‐squared
value
of
0.9704
represents
that
97%
of
the

increases
in
percentage
of
hard
coal
in
PEC
is
related
to
decreases
in
percentage
of
nuclear
in
PEC.

A
change
of

one
standard
deviation
in
the
percentage
of
nuclear,
σX1,
relates
to
a
15%
change,
increase
in
a
temporal

perspective,
in
hard
coal.

3.2
–
U.S.
natural
gas
on
hard
coal

The
relationship
between
U.S.
natural
gas
production,
measured
in
billion
M3,
and
German
hard
coal

consumption
as
a
percentage
of
PEC
exemplifies
the
temporal
sensitivity
of
this
analysis.

Analysis
of
data
from

1990
to
2013
shows
a
negative
linear
trend,
as
does
an
analysis
of
data
from
2007
to
2013.

Refining
the
data

by
another
three
years
to
limit
the
influence
of
the
2008
economic
crises
flips
the
linear
relationship
to
positive.

It
is
also
possible
that
there
would
be
a
delay
between
the
start
of
the
U.S.
natural
gas
boom
and
the
time
that

increased
U.S.
hard
coal
exports
negatively
affected
global
hard
coal
prices,
and
therefore
a
delay
before

Germany
began
consuming
higher
volumes
of
cheap
hard
coal.

This
anticipated
delay
would
have
been
further

prolonged
by
the
2008
economic
crises
that
had
the
deepest
negative
impact
on
German
PEC
in
2009.

While

these
outcomes
seem
reasonable,
this
analysis
has
found
no
statistical
relationship
between
U.S.
natural
gas

production
and
German
hard
coal
as
a
percentage
of
PEC.

The
analysis
shows
that
0.08
of
the
change
in
hard

coal
in
German
PEC
is
related
to
U.S.
natural
gas
production.

ΔY
=
beta1hat
*ΔX1

ΔX1=σX1

ΔY1
=
0.1475478

Figure
2
Influence
of
nuclear
on
coal
as
a

percentage
of
PEC
(2010-‐2013)
Source:
Author

using
data
from
BMWi
(2014)

Troutman,
Homework
#3
7

560 580 600 620 640 660 680
0.1100.1150.1200.1250.1300.1350.140
Influence of U.S. NG production on coal as percentage of PEC (2007-2013)
NG
Coal

620 640 660 680
0.1220.1240.1260.128
Influence of NG on coal as percentage of PEC (2010-2013)
NG
Coal

ΔY
=
beta1hat
*ΔX1

ΔX1=σX1

ΔY1
=
0.1531064

ΔY2
=
0.05998204

3.3
–
Nuclear
and
U.S.
natural
gas
on
hard
coal

Percentage
of
nuclear
energy
in
PEC
has
a
strong
negative
correlation
with
percentage
hard
coal
in
PEC.

U.S.
natural
gas
production
has
no
statistically
significant
relationship
to
the
percentage
of
hard
coal
in
German

PEC.

Still,
the
regression
of
both
regressors
against
the
independent
variable,
percentage
of
hard
coal
in

German
PEC,
has
a
strong
correlation
with
97%
of
the
change
in
hard
coal
resulting
from
decreases
in
nuclear

and
simultaneous
increases
in
U.S.
natural
gas
production.

The
change
in
one
standard
deviation
in
both
the

percentage
of
nuclear
energy
in
German
PEC
and
U.S.
natural
gas
production
in
billion
M3
is
reflected
by
a
12%

change
in
the
portion
of
hard
coal
in
German
PEC.

Although
there
is
no
statistically
significant
linear

relationship
between
U.S.
natural
gas
production
(billion
M3)
and
the
percentage
of
hard
coal
in
German
PEC

there
is
a
positive
linear
trend.

This
result
confounds
with
the
negative
linear
relationship
between
nuclear

and
hard
coal
impeding
analysis.

The
data
for
U.S.
natural
gas
production
was
inverted
to
also
move
in
a

negative
linear
trend.

The
two
regressors
together
have
a
slightly
weaker
correlation
to
the
independent

variable,
the
percentage
of
German
hard
coal
in
PEC,
than
the
percentage
of
nuclear
in
German
PEC
alone.

Figure
3
Influence
of
U.S
natural
gas
production
(billion
M3)
on
coal
as
a

percentage
of
PEC
(2007
to
2010
and
2010-‐2013)
Source:
Produced
by

author
using
R-‐
software
and
data
from
BMWi
(2014)

Troutman,
Homework
#3
8

0.080 0.085 0.090 0.095 0.100 0.105
0.1220.1240.1260.128
Influence of nuclear and U.S. NG production on coal as percentage of PEC (2010-2013)
Nuclear
Coal
620 640 660 680
0.1220.1240.1260.128
NG
Coal
0.080 0.085 0.090 0.095 0.100 0.105
0.1220.1240.1260.128
Influence of nuclear and U.S. NG production (inverted) on coal as percentage of PEC (2010-2013)
Nuclear
Coal
620 640 660 680
0.1220.1240.1260.128
NG
Coal

0.080 0.085 0.090 0.095 0.100 0.105 0.110
0.1100.1150.1200.125
Influence of nuclear and U.S. NG production (inverted) on coal as percentage of PEC (2009-2013)
Nuclear
Coal
600 620 640 660 680
0.1100.1150.1200.125
InvertedNG
Coal

ΔY
=
beta1hat
*ΔX1

ΔX1=σX1

ΔY1
=
NA

ΔY2
=
NA

ΔY3
=
0.119381

Figure
4
Influence
of
U.S
natural
gas
production
(billion
M3)
and
percentage

of
nuclear
on
German
PEC
on
coal
as
a
percentage
of
PEC
(2010-‐2013)
,

(2010-‐2013
U.S.
NG
inverted),
(2009-‐2013
U.S.
NG
inverted)
Source:

Produced
by
author
using
R-‐
software
and
data
from
BMWi
(2014)

Troutman,
Homework
#3
9

4
–
Conclusion

The
results
of
this
analysis
suggest
that
decreases
in
the
percentage
of
nuclear
in
German
PEC
has
a

strong
negative
correlation,
97%,
with
increases
in
the
percentage
of
hard
coal
in
German
PEC,
increasingly
so

over
the
past
four
years.

Increasing
the
observational
period
to
1990
to
2013,
i.e.
n=33,
results
in
a
diminished

significance.

This
analysis
has
an
R-‐squared
of
0.01162
meaning
that
less
than
1%
of
changes
in
hard
coal
as
a

percentage
of
PEC
from
the
period
1990
to
2013
could
be
attributed
to
changes
in
nuclear
energy
as
a

percentage
of
German
PEC.

This
drastic
change
is
predictable
as
nuclear
energy
as
a
percent
of
German
PEC

experience
a
rapid
increase
from
1990
to
2000
and
then
rapidly
declined
with
the
adoption
of
the

Energiewende
in
2000
and
the
decision
to
phase-‐out
nuclear
energy
in
Germany.

While
this
analysis
showed

no
statistical
relevance
between
the
U.S.
natural
gas
boom
in
the
past
six
years
and
an
increase
in
hard
coal

percentages
in
German
PEC,
the
authors
speculates
that
this
influence
may
have
been
masked
by
the
2008

economic
crises,
which
not
only
resulted
in
a
dramatic
cut
in
German
PEC,
but
also
increased
economic
viability

for
domestic
lignite
consumption
in
Germany.

It
will
be
interesting
to
reevaluate
the
significance
of
this

phenomenon
as
current
estimates
suggest
continued
increased
in
U.S.
natural
gas
production
over
the
coming

two
decades,
resulting
in
an
increase
in
hard
coal
exportation
over
the
same
period.

How
this
increase
in
global

hard
coal
supply
effects
global
hard
coal
prices
will
be,
in
the
author’s
opinion,
dependent
upon
the

continuation
of
the
global
trend
away
from
carbon-‐intensive
energy
sources,
continued
deployment
of

renewable
energy
sources
and
increasing
state-‐level
carbon
dioxide
emissions
regulations.

The
last
may
have
a

surprising
development
in
the
coming
years
depending
on
the
outcome
of
the
Conference
of
the
Parties
in
Paris

this
December
(2015).

5
–
References

British
Petroleum
(BP)
(2014),
“Statistical
Review
of
World
Energy:
June
2014,”
pages
20-‐29

Bundesministerium
fur
Wirtschaft
und
Energie
(BMWi)
(2014),
“
Facts
and
Figures
Energy
Data:
National
and

international
development.
Web.
[Accessed
01.30.2015]

http://www.bmwi.de/DE/Themen/Energie/energiedaten.html

Deutsch
Bank
Research
(2014)
The
changing
Energy
Mix
in
Germany:
The
drivers
are
the
Energiewende
and

international
trends.

Deutsch
Bank
AG.

Frankfurt
am
Main.

European
Association
for
Coal
and
Lignite
(EURACOAL)

(2013),
“Coal
Industry
Across
Europe”,
5th
Edition,

pp.5-‐15,
29-‐33.

European
Commission
(EC)
C(2014)
8786:
Commission
Decision
of
25.11.2014
On
the
Aid
Scheme
SA.33995

(2013/C)
(ex
2014/NM)

Heinrich
Böll
Stiftung
(2014)
The
German
Coal
Conundrum:
The
status
of
coal
power
in
Germany’s
energy

transition.

Washington,
DC.

International
Energy
Agency
(IEA)
(2014),
“Key
World
Energy
Statistics”,
Paris,
page
14-‐15.

International
Energy
Agency
(IEA)
(2013),
“Coal
Information
2013”,
Paris,
page
11-‐17.

Troutman,
Homework
#3
10

Annex
1
–
Single
Variable
Linear
Regressions

Troutman,
Homework
#3
11

Troutman,
Homework
#3
12

Troutman,
Homework
#3
13

Troutman,
Homework
#3
14

Annex
2
–
Data
Discrepancies

Annex
3
–
Preliminary
Results

Identifying influencing factors for increased coal consumption in Germany despite political directives of the Energy Transition

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