Source: Institute for Energy Economics and Financial Analysis
The German government is in advanced talks with utility RWE AG over the schedule and compensation for switching off some of the company’s lignite-fired power plants over the next few years, part of a plan to entirely phase out coal-fired electricity production in Europe’s largest economy by 2038.
In an update on the ongoing process to turn recommendations on the phaseout into law, the economy ministry said July 3 that there was a common understanding that the first closures will affect the oldest lignite-burning units, which are operated by RWE in western Germany. “The talks with RWE are advanced and run constructively,” the ministry said.
While RWE is by far the largest coal plant operator in Germany, utilities affected by the phaseout also include Sweden’s Vattenfall AB; Czech group Energetický a prumyslový holding a.s., or EPH; and German companies EnBW Energie Baden-Württemberg AG, STEAG GmbH and Uniper SE. France’s Engie SA recently sold its remaining coal plants in Germany to U.S. private equity firm Riverstone Holdings LLC.
The government is trying to come to mutual agreements for closing lignite plants and plans to close hard coal-fired power stations though an auction process — at least during the first few years of the phaseout. Hard coal operators will be able to bid a price for closing their assets and the government will award those that offer the lowest price per carbon dioxide emissions.
The ministry is planning to submit a draft law on the hard coal closures to Chancellor Angela Merkel’s cabinet in the fall and add any agreements with lignite operators as the law winds its way through the parliamentary process, with a goal of passing the legislative package by the end of the year.
Germany still has approximately 41 GW of hard coal and lignite plants connected to the grid, which produced more than a third of the country’s electricity in 2018. It wants to reduce capacity for the two fuels to 15 GW each by 2022 and to 17 GW total by 2030, with the latter figure split between 9 GW lignite and 8 GW hard coal. The last plants would be disconnected by 2038 under the plan.