Germany's transition away from coal continues to progress as market forces drive it, despite the ongoing energy crisis.

Five years after legally committing to end coal power, Germany's phase-out is still on track, although a new energy crisis, delays in replacing capacity, and doubts about earlier closure pledges are testing the agreement's durability.

Significant changes have occurred in Germany since the decision to phase out its main energy source. Following a consensus from a coal exit commission, a law was enacted in 2021 to stop coal-fired power generation by 2038 at the latest. Since then, the country has faced a pandemic, an energy crisis from Russia's invasion of Ukraine, a nuclear exit, two national elections, and Donald Trump's second U.S. presidency. Despite these challenges, the deadline for coal remains unchanged.

A report assessing the phase-out's effects on energy security, electricity prices, greenhouse gas emissions, and coal mining regions is expected in August 2026, marking the first official evaluation of progress five years after the law’s adoption. Previous reports were canceled due to the energy crisis stemming from the Ukraine conflict and the former government's collapse.

At the time of the agreement, environmentalists criticized the proposed end date as too late. Progress has been made in decommissioning coal plants, with coal's share of electricity production falling from 23.3% in 2020 to 20.4% in 2025, while renewable energy’s share rose from about 44% to over 57%. By the end of 2025, Germany had retired over 14 gigawatts (GW) of coal capacity, about one-third of its total at the time of the deal. Contrary to worries about the nuclear phase-out in 2023, coal power did not fill the gap left by the shutdown of the last three nuclear plants, as new renewable capacity sufficiently compensated.

A 2025 report from the Stockholm Environment Institute (SEI) noted that Germany is one of a few countries with a clear decommissioning plan aligned with its emissions reduction targets. However, it is still Europe's largest consumer of coal.

By the end of 2025, around 15 GW of both hard coal and lignite capacity remained, down from roughly 50 GW in 2010. Approximately 6.7 GW of this hard coal capacity has been transferred to a grid reserve, where plants are offline and only provide power when necessary.

The Federal Network Agency (BNetzA) has ended auctions for early voluntary coal retirements and plans to mandate the closure of the oldest plants without compensation. They aim to oversee the retirement of an additional 5.5 GW of coal capacity by the end of 2028, though compliance from plant operators is not guaranteed, as they can declare some plants "systemically relevant" to remain operational longer.

Market dynamics may render the 2038 deadline irrelevant even sooner, as renewable energy sources are already cheaper to produce than coal. EnBW's analysis shows that producing one kilowatt-hour (kWh) from new onshore wind costs between 4.3 and 9.2 cents, and solar ranges from 4.1 to 14.4 cents. In contrast, hard coal costs between 17.3 and 29.3 cents per kWh, and lignite costs between 15.1 and 25.7 cents, with an additional 7 cents due to carbon pricing under the EU Emissions Trading System (ETS). EnBW concluded that this renders coal power economically unviable.

Electricity market modeling indicates that a phase-out determined by price could happen much quicker. Hauke Hermann from the Institute of Applied Ecology (Öko-Institut) stated that the market is outpacing the planned schedule. With low gas prices and high emissions allowance prices, Germany could potentially phase out coal as early as 2031 or 2032.

This outlook remains steady despite disruptions from conflicts, such as the US- and Israeli-led attack on Iran, which initially caused gas prices to rise. Though prices have fluctuated and remained high, Hermann believes this won’t significantly alter coal’s declining market presence unless gas prices remain elevated without a corresponding increase in ETS prices.

What if the effects of the Iran conflict on gas prices are prolonged? Chancellor Friedrich Merz has indicated that coal plant closures may need to be postponed if energy shortages arise from supply disruptions in the Middle East. The coal phase-out law allows for flexibility, permitting some coal plants to temporarily re-enter the market, which occurred after Russia's invasion of Ukraine due to heightened supply risks.

Some coal industry factions view the energy crisis as a chance to bolster coal's role. The company Steag Iqony argued that domestic coal should serve not just as a last-resort solution but also as a buffer against gas price increases. The energy-intensive industry group VIK expressed skepticism toward using gas for electricity generation when alternatives exist, even though heating utilizes a larger share of gas than power generation. The coal company Leag, advocating for exemptions from European emissions trading, contended that "made in Germany" coal is uncompetitive due to ETS constraints.

While Merz has not called the coal exit’s completion into doubt, he emphasized that climate policies shouldn't hinder economic competitiveness, advocating for an upcoming ETS reform to reflect this balance. However, Nina Scheer from the Social Democrats (SPD) warned that loosening coal regulations would be detrimental to energy transition efforts and create new fossil lock-in effects.

Most coal plants slated for closure are old and inefficient, making their potential impact on price reduction questionable. Altering regulations for operators would likely face legal challenges domestically and in the EU. The coal exit law has already allocated over four billion euros in compensation and 40 billion euros for structural support to coal regions, so any modifications would likely attract scrutiny from European competition regulators.

According to operators, a 2030 phase-out in North Rhine-Westphalia (NRW) is still achievable. Uniper's CEO Michael Lewis stated that increasing reliance on coal would undermine market signals and investment security. RWE's CEO Markus Krebber echoed this sentiment, indicating that their company only aims to maintain plants in a security reserve post-decade, contingent on federal coverage of associated costs.

Both energy executives emphasized the need for adequate backup capacity for a timely coal phase-out in NRW. The country plans to install 12 GW of new gas-fired backup plants to replace decommissioned coal capacity, but delays in required auctions mean these plants likely won't be operational until the early 2030s. Economy Minister Katherina Reiche plans to conduct two auction rounds in late 2026 for these plants, which will be integrated into a new capacity market.

The energy sector and NRW’s state government assert that the timeline for phasing out coal will depend on the construction of new gas plants, estimated to require five years from auction to operation. However, environmentalists argue that the proposed gas plants are excessive and overlook alternatives like battery storage. Öko-Institut’s Hermann believes a one-to-one gas replacement for retired coal capacity may not be necessary, as other methods could help maintain grid stability. He remains optimistic about achieving a 2030 phase-out in NRW as planned.

What about other coal states in eastern Germany? Leaders in Saxony and Brandenburg, which includes the large Lusatia mining region, have been hesitant to adopt a more aggressive exit timeline, citing significant structural economic challenges compared to the more industrialized NRW.

Despite political leaders' rhetoric, there is increasing recognition in eastern states that carbon pricing and renewable energy growth will hasten the phase-out. Hermann suggests that targeted structural support for job markets, transport infrastructure, and research and development will help secure these regions' futures as energy hubs rather than coal-dependent areas. Even if a faster coal exit isn't prioritized by the Merz government, "market forces will continue regardless," Hermann asserted.