New coal exit plan by German think-tank draws criticism

Last year's verdict by Germany's Federal Constitutional Court on compensation for the phasing out of the country's nuclear fleet could also mean some 18 GW out of 25 GW of coal-fired generation could face immediate closures, without the state having to pay compensation, according to the German think tank Agora, drawing criticism from across the coal and lignite sector.

The analysis, carried out by law firm BeckerBüttnerHeld, examined last year's nuclear phase-out and concluded that in most cases, nuclear plants operating for more than 25 years were shut down without compensation. The law firm claims that a similar ruling could be used to phase out coal plants.

"From a coal point of view, the Agora study is appalling" said Franz-Josef Wodopia, managing director of the coal importers' association, Verein der Kohlenimporteure (VDKi).

Wodopia noted that the big difference between coal and nuclear power stations is the threat posed by an individual nuclear power plant is much greater than a tiny contribution to the global warming problem by an individual coal power station.

Pressure to close coal plants in Germany is mounting following the country's elections, IHS Markit analysts warn, as the Green party negotiates with Chancellor Angela Merkel, to form a coalition.

The Green party wants to shut down the 20 "most polluting" coal plants by the next elections, slated for 2021.

Those closures would tend to target lignite-fueled power plants, an outcome that would affect the country's lignite production, meaning some form of social help and industrial redevelopment would have to be proposed to affected regions.

The sector has also rounded on the think tank. Debriv, Germany's lignite federation said Agora's proposals on a coal and lignite phase-out are "inadequate, superficial and purely ideological".

Debriv argued that lignite power stations operate on the basis of unlimited, legally compliant permits and, like power stations, lignite opencast mines are investments protected by the German Constitution's protection property clause.

Other interest groups were also fiercely opposed to Agora's suggestions. The energy and water federation, BDEW, said the proposal would create legal uncertainties and disrupt employment arrangements, coal supply contracts, electricity supply contracts, and CO2 emissions certificate arrangements.

Germany is still heavily dependent on thermal coal and lignite to cover its electricity demand. In September combined steam and lignite accounted for 40% of Germany's power generation.

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Efcharis Sgourou is a journalist covering the European coal market at IHS Markit. This article originally was published as part of Coal Newswire Service.
Posted 26 October 2017

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.