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Business & Finance

Germany awards second round of permits to close hard coal plants

  • Germany has promised to abandon coal by 2038 and achieve a mostly carbon-free energy system by 2050, but it is also trying to lessen the impact on utilities, regions, employment and the public budget.
  • The regulator sets a maximum price per MW of capacity to cap the public sector bill. The ultimate price takes into account bidders' offers and the CO2 emissions of the plants in question.
Published April 1, 2021

FRANKFURT: More than 1,500 megawatts (MW) of coal-fired generation will be shut from Dec. 8 this year, Germany's energy regulator said on Thursday, announcing the results of a second round of auctions designed to cushion the cost of closing polluting plants.

Germany has promised to abandon coal by 2038 and achieve a mostly carbon-free energy system by 2050, but it is also trying to lessen the impact on utilities, regions, employment and the public budget.

Under a series of tenders between 2020 and 2027, operators are asked to declare at which price they would be prepared to shut their plants that use hard coal in return for funds to offset some of their losses.

The regulator sets a maximum price per MW of capacity to cap the public sector bill. The ultimate price takes into account bidders' offers and the CO2 emissions of the plants in question.

The 1,514 MW to go offline in December are Uniper's 757 MW Wilhelmshaven plant on Germany's North Sea coast and Czech operator EPH's Mehrum and Deuben power plants of 690 MW and 67 MW respectively.

After 2027, compensation will no longer be available, so operators are ready to bid as low as possible to avoid losing out to competitors.

"The auction was again oversubscribed," Jochen Homann, the head of the Bundesnetzagentur regulator, said. "The highest award lies significantly below the previously set maximum price."

In all, the successful bidders will receive between zero and 59,000 euros per MW, the regulator said.

This was what they had offered to close their plants for, after the regulator set a maximum price of 155,000 euros/MW.

Bidding for the third auction for the closure of 2,481 MW by the end of 2022 will close on April 30.

Following a first auction, the regulator closed 4,788 MW of coal-fired capacity on Jan 1, 2021.

More highly polluting brown coal is being shut down via a separate scheme with fixed compensation.

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