Germany’s coal conundrum: Moving toward renewable energy before the infrastructure is ready

  • Output from Germany's coal plants dropped in the first half of the year.
  • Meanwhile, renewable sources of energy surpassed coal to become the nation's largest source of power generation.
  • But Berlin is falling short in its ambitious renewable energy initiative.

Moving away from carbon as a source of energy is a key ambition for the European Union and no less for its largest economy Germany.

But despite the a fall in the number of coal plants and the use of renewable energy increasing, Germany faces the problem of creating adequate and "intelligent" power grids across the country to harness and store that renewable energy and then transmit and distribute it.

Output from Germany's coal plants dropped in the first half of the year as renewable sources of energy — from wind, solar, biomass and hydro power — surpassed coal to become the nation's largest source of power generation.

Nonetheless, Berlin is falling short in its ambitious renewable energy initiative, known as "energiewende," that envisages a transition from coal and nuclear power to renewable sources and a low-carbon economy.

According to Germany's Ministry of Economic Affairs and Energy, it will not meet its pledge to reduce greenhouse gas emissions by 55 percent (compared to 1990 levels) by 2030, and instead will only achieve a maximum cut of 45 percent.

Germany is still producing a large amount of its energy from coal, with lignite and hard coal around 37 percent of Germany's power production in 2017 and responsible for over 80 percent of emissions in the energy sector.

The German government has stepped up efforts to stop using coal altogether. In May, it announced the formation of a task force, the "coal exit commission," to be overseen by the economy and energy ministry to explore how to reduce the use of, and eventually exit from, coal-powered energy altogether, as well as finding alternatives for workers and regions where coal power dominates.

One of the main concerns for Chancellor Angela Merkel's government is investing in and building an appropriate national power grid that is designed for a new generation of renewable energy. An estimated 7,000 kilometers of power grid routes need to be built, a massive undertaking.

Michael Sen, a member of the managing board of German engineering and energy infrastructure giant Siemens, told CNBC that the energy industry was in a state of transition.

"I think it is way too early to judge on whether we're missing out on something. We're in the midst of a journey, the 'energiewende,' or energy transition; and we see an underlying trend that there is a societal need for decarbonization; and we're having more and more distributed and decentralized energy power generation systems; and we're transitioning from a conventional world to a new energy world," he said.

"I'm confident that this country and many others will fulfil their targets with the help of efficient technology," he added. Defending Germany's continuing use of coal, Sen said the energy transition could not just happen "at the flip of a switch."

"Coal has been a traditional source for power generation in this country, as it has in other countries… but we have seen a lot of players emerge in renewable industries."

Mark Lewis, managing director of the Carbon Tracker Initiative, told CNBC's "Squawk Box Europe" that the transition away from coal power was a conundrum for Germany.

"They are rightly regarded, globally, as the leaders on renewable energy… But on the coal side, that's a huge problem for them in terms of their credibility on climate change policy globally," he said.

"They're phasing out nuclear power but that's why (greenhouse gas) emissions remain stubbornly high in Germany, so it is a difficult circle to square."