Utilities doubt 2030 German coal exit

Utilities told Argus that the window for bringing the German coal phase-out forward by eight years to 2030 is fast disappearing, citing a lack of clarity on details of tenders for hydrogen-ready gas-fired plants under the power plant strategy and the tight timeline to build the new dispatchable capacity.

Utility EnBW told Argus that the 10GW of hydrogen-ready gas-fired capacity planned for tender is "unlikely to be sufficient" for an early coal phase-out, stating that analysts see a "greater need" for dispatchable capacity. And Uniper chief executive Michael Lewis said at the E-World conference in Essen that 10GW is "not enough", and last week added that 20-25GW of new capacity would be needed to even replace decommissioned power plants. And the timing to meet the 2030 target is "very tight", Lewis said.

Steag told Argus that the country's exit from coal-fired power generation by 2030 is "still possible" but has become "less likely", and highlighted the fact that grid regulator Bnetza has designated some coal-fired plants as system-relevant as far out as 2031. According to analysis from the country's four transmission system operators (TSOs) in September last year, bringing forward the market-side coal phase-out is possible from a grid congestion perspective, but coal-fired plants will need to stay in the grid reserve beyond this date. And on Tuesday, Bnetza set out a timeline for statutory reduction of coal burn, which still anticipates the last units going off line in 2038.

Beyond 2030, modelling by Swiss utility Axpo "very clearly indicates" that more than 10GW of hydrogen-ready capacity will be needed, head of fundamental analysis and modelling Andy Sommer told Argus at E-World. The country will probably "come back" to the original target of around 25GW at some point, according to Sommer.

Utilities call for clarity on strategy details

Utilities also told Argus that the government must publish additional details about the power plant strategy as soon as possible to ensure security of planning for new hydrogen-ready gas-fired plants. While Leag and RWE said that the 10GW of capacity to be tendered is an "important step" and goes "in the right direction", respectively, they also, along with Uniper and Steag, told Argus that additional details of the power plant strategy must be published as soon as possible as remaining uncertainties around tendering conditions impede investment planning. Steag, which has already begun preliminary planning work at existing coal-fired power plant sites for future hydrogen-ready units, pointed to the lack of timeline and concrete details for the tenders as well as the pending state aid agreement with the EU, while EnBW highlighted that as projects can take between six and eight years to commission, tenders should start this year.

Leag and EnBW argued that plants should be built at sites with existing infrastructure, which EnBW called more "cost-effective". And Leag reiterated that it favours a fair distribution of sites across Germany without preferential treatment for certain regions. The bulk of its capacity is lignite-fired and located in eastern Germany while demand is concentrated in the west and south of the country. But EnBW pointed to expectations from TSOs that southern Germany will see "particularly high demand" for gas-fired plants for grid stability, and said this could lead to it investing further at its other sites in Baden-Wurttemberg depending on the details of the incentive mechanisms in the strategy.

Several utilities welcomed the introduction of a capacity mechanism by 2028, with Uniper stating that it was "very relieved" that the government is in favour of introducing such a mechanism, and RWE stating that it is an "efficient way" to ensure security of supply. But EnBW, while welcoming the intention, urged further clarity on how the capacity mechanism and the power plant strategy "should interact", as uncertainty on this will make it "more difficult" to bid in the tenders.

Leag said it plans to build 3GW of hydrogen-ready gas-fired plants by 2030, and RWE said it is prepared to build the same capacity if the framework conditions allow economically-viable operation. Steag is planning to build 2-2.5GW across three plants at its sites in Bergkamen, Bexbach and Quierschied-Weiher. And Uniper assumes that it will build a "significant portion" of the new capacity, having pointed to planned "gigawatt scale" flexible plants in October.

EnBW is also currently working on various fuel-switch projects that will see coal-fired units at its Altbach/Deizisau, Heilbronn and Stuttgart-Munster sites replaced with hydrogen-ready gas-fired combined heat and power plants. Work should be completed by next year for Stuttgart-Munster, and by 2026 for the other two sites, the utility said.

Vattenfall did not disclose planned capacity additions. Together, RWE, EnBW, Leag, Vattenfall and Uniper's portfolios account for over half of Germany's installed capacity outside the renewable energy act.

By Helen Senior and Adrien Seewald