Germany Runs the Risk of Losing its Innovation Lead in the Field of Coal-Fired Power Plants – China is Catching Up

Japan and Germany clearly are the innovation leaders in innovative coal technologies. Given the decreasing domestic importance of coal, however, this lead is at risk. These are the findings of a study conducted by the Centre for European Economic Research (ZEW) in Mannheim in cooperation with Augsburg University, the Institute for Policy and Management (IPM) in Peking, and Forschungszentrum Jülich (FZJ) on behalf of the Federal Ministry of Education and Research (BMBF).

Since the 1990s, “lead markets” for efficient coal technologies have emerged in Japan and Germany. Typically, certain innovations are first established on these markets before they spread to other countries. Japan and Germany are the leading countries in the development of ultra-supercritical coal-fired power plants (USC). Germany’s external trade surplus with steam turbines ranks second after that of Japan. Germany was able to gain and enhance this technological lead because coal used to be a fully accepted energy source in Germany. Over the past ten years, though, a paradigm shift towards renewable energy has taken place. As a consequence, hardly any new coal-fired power stations have been built or financially funded since. Coal-friendly framework conditions, however, prevail in other countries such as China, where some 50 new coal-fired power plants are built every year. Due to this enormous market growth, China is increasingly building up technological know-how, thereby becoming able to outstrip Germany.

“Germany is running the risk of losing its leading world market position in the field of efficient coal technology. This is a particularly negative development since coal will become an important energy source worldwide in the decades ahead. Innovative coal technology is not only an economic factor, it also contributes to climate protection,” says Dr. Klaus Rennings, environmental economist at ZEW. “While Germany is trying to find a way to replace nuclear energy, expanding economies such as China and India particularly rely on coal, in addition to renewable energies, to meet their growing energy demands.”

According to the ZEW study, China has already caught up significantly in the field of coal technologies. China has great advantages over Germany concerning important lead market parameters like prices, demand, and regulation standards. China pursues a “leapfrogging strategy”: it takes advantage of cheap labour costs and skips some technological stages. Following this strategy, China has already become the market leader in the segment of low- and middle-quality boilers.

The Chinese market is very dynamic. According to the country’s new five-year plan, China intents to build an even more innovative 700°C coal-fired power station, which would equal technological leadership. Even if doubts remain as to the success of this project, because China has very little experience in developing new technologies, the question arises how long Germany will be able to keep its innovation lead.

“The study shows that at least in the coming decades, energy-efficient coal-fired power plants and climate protection are not mutually exclusive in a globalised economy,” says Rennings. “If Germany wants to play a leading role in the field of efficient coal technology, political decision-makers and our entire society need to reconsider the importance of coal and create an innovation-friendly climate in this area.”

This study is part of the project “Lead Market Strategien: First Mover, Early Follower und Late Follower”.

For futher information please contact

Dr. Klaus Rennings, Phone +49 621/1235-207, E-mail rennings@zew.de