Germany agrees on hard coal tenders maximum bid

The draft plan passed by Germany's cabinet on Wednesday will put pressure on hard coal-fired power plants, as it stipulates a steeply falling maximum bid price in the annual tenders, dropping from €165,000/MW of nominal capacity in 2020 to €49,000/MW in 2026.

Under the final draft law, hard coal-fired power generation is to fall to 15GW by the end of 2022, and to 8GW by the end of 2030. Hard coal power plants will take part in annual tenders until 2026, with the first tender to take place on the first working day of the month, two months after the official publication of the law.

Grid regulator Bnetza will set the annual tender volume in line with the reduction targets, except for the years 2020 and 2021, where the draft law stipulates tender volumes of 4GW and 1.5GW, respectively. And the years 2023 to 2025 will see an additional tender volume of 1GW respectively, to compensate for 1.1GW Datteln 4, which is scheduled to start commercial operations this summer.

Should tenders be undersubscribed in 2024-26, they will be complemented by mandatory closures. From 2027, mandatory closures will fully replace the tenders.

Bnetza will every year, starting on 1 July 2021, publish an updated list of hard coal plants ranked according to their mandated closure, depending mainly on their age and system relevance. Power plants set for closure following the 2020 tender will be banned from selling power even before their system relevance has been evaluated.

In the past months leading politicians of Germany's eastern lignite regions, which are under pressure from the strong right-wing populist AfD party, managed to push through a postponement of lignite closures compared with the original proposal of the commission on growth, structural change and employment (WSB). This postponement has led to the "squeeze-out" of hard coal.

"We managed to avoid east-west conflicts," federal economy and energy minister Peter Altmaier said at the public presentation of the draft in Berlin.

The ministry stressed that the hard coal phase-out is "viable from a grid operational point of view", with Bnetza to regularly monitor the development of system security.

But WSB member and energy expert Felix Mattes of consultants Oeko-Institut today warned that the hard coal "squeeze-out" is "unwise" from both a technical and an energy policy point of view.

And it sends out a "fatal" sign that politicians cannot be trusted to stick to the compromises they reach, Mattes said.

Munich-based regional security coordinator TSCNet managing director Maik Neubauer today warned that the hard coal phase-out puts at risk Germany's grid stability, in particular in the north, where closures are expected first.

Altmaier said that the compensation for the operation of Datteln 4 — which the WSB had suggested would not come on line — will be clarified in the coming weeks. It will be reached either through higher lignite reduction concessions from operator Uniper or by raising the volumes in the hard coal tenders.

Uniper is heard to be under pressure from hard coal operators to give in to higher reduction concessions from its lignite power plants.

By Chloe Jardine