For a country that prides itself on its clean, green image, Germany’s power sector is remarkably dirty.

Despite having the third-largest installed base of wind and solar power after China and the U.S., Germany still relied on coal for 45% of its needs as recently as 2015. While the U.K. has been going without the fuel for months at a time, Germany’s legislation on retiring its coal fleets, which passed Friday, will keep plants switched on as late as 2038.

That “as late as” is key, though. Switching off the 40 gigawatts of coal power currently in operation is structured as a series of deadlines, rather than appointments — and there are strong incentives for generators to quit the market early. With benchmark prices for coal-fired power already in negative territory right now, don’t be surprised to see the entire industry shuttered by the middle of the decade.

To understand why, it’s worth considering that Germany’s main coal-fired utilities RWE AG, Uniper SE and Lausitz Energie Kraftwerk AG aren’t so much operators of industrial plants as commodity brokers trading the spread between processed and unprocessed products. Just as agricultural traders hope to make money on the crush spread between soybeans, soymeal and soya oil and refiners profit from the crack spread between crude, gasoline and diesel, coal-fired utilities trade the dark spread.


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